Interest Paid on a Student Loan

Interest paid on a student loan qualifies for a non-refundable tax credit if the loan was issued under a government program, such as the Canada Student Loans Act, the Canada Student Financial Assistance Act, or Quebec’s Loans and Bursaries Program. Interest on personal loans, lines of credit, or consolidated loans does not qualify.

Only the student who is legally responsible for the loan can claim this credit; it cannot be transferred to a parent or spouse. The credit can be claimed for interest paid during the year or carried forward for up to five years if it was not previously claimed.

The credit reduces the amount of provincial or federal tax payable but does not result in a refund if the credit exceeds the tax owing.

Federal tax credit (Line 31900): Interest on government student loans issued under the Canada Student Loans Act, the Canada Student Financial Assistance Act, the Apprentice Loans Act, or similar provincial legislation is eligible for the credit. Interest paid on private or consolidated loans is not eligible.

Quebec provincial tax credit (Line 385: For Quebec residents, line 385 on the provincial tax return is used to claim a non-refundable tax credit for interest paid on eligible student loans.

The tax credit for student loan interest can be claimed only for interest paid on loans issued under a government program, such as the Quebec Loans and Bursaries Program or the Canada Student Loans Act. Interest paid on private or consolidated loans does not qualify.

The credit can be claimed for interest paid during the current tax year or any of the previous five years, provided it has not already been claimed. Only the student who took out the loan is eligible to claim the credit; parents or spouses cannot do so on the student's behalf.

This is a non-refundable credit, meaning it reduces the amount of provincial tax payable but does not result in a refund if the credit exceeds the amount of tax owed.

Any unused credit can be carried forward for up to five years, which is beneficial for students with low or no income who may not owe tax in the year the interest was paid.

If the Quebec government covers the interest on the student’s loan during a period of parttime study, no credit can be claimed for the interest not paid by the student.

To claim or carry forward an amount, complete Schedule M and file it with your return. You are the only person who can claim an amount for the interest paid on a student loan granted to you.

Example :

John Barry is studying full time at a local University. Rather than applying for Quebec student aid called AFE (Aide financière aux études), he took a personal loan in financial institution to pay his tuition fees. Financial Institution issued her statement showing interest paid on loan. Can she claim interest on personal loan taken for studies on her tax return.

Answer: No, the loan must be approved under Canada Student loan or Provincial student loan program. The receipt issued by institution and Canada student loan will clearly state the governing body on the statement or receipt.

Example :

Gregory Jacob’s net income is $ 30,000. He paid $ 500 in interest on approved student loan.

Carry-forward of interest paid on a student loan: Interest paid on a student loan from 1998 through 2024 can be carried forward to a future year, provided it has not already been claimed on a previous return. To determine the amount eligible for carry-forward, complete Schedule M and include it with the tax return.