A resident alien, when used as a tax term, is defined as a foreign national who has a permanent residency status or a “green card”. On the other hand, a “non resident alien” is a foreigner who has a conditional residency status which is granted for a number of reasons, including college education. Paying taxes is a civic obligation that every taxpaying individual needs to seriously meet. With this in mind, US tax laws provide that non resident aliens are taxed based on their US income and are eligible for only one tax exemption and not the usual tax deductions that US citizens and resident aliens enjoy.
However, since student loans, as provided by federal law, are exempted from gross income, a totally different set of rules govern the taxpaying obligations of non residents. Although income that non resident college student receive from student loan is generally speaking taxable and should be reported when one files his own income tax return. However, instead of standard deductions which US citizens and resident aliens make on their income tax, non residents must itemize their deductions. Unless, they are able to get a permanent residency status or covered by a tax treaty, non residents cannot claim the tax credit that they could have earned due to their college expenses.
Nevertheless student loans continue to be very helpful to non resident college students considering the low interest and favorable terms even if they cannot enjoy the tax credit for college expenditures that are normally claimed when a tax return is submitted each year. Normally, tuition fees that amount to over $100 qualify for a tax credit. Tax credits do not however include expenses for student association fees, medical care and living expenses during one’s stay in college.
Non resident college students applying for a college student loan need to meet the usual credit requirements. However, there is high approval rate of most applications. A resident co-signer is usually required, but unlike other loans, the co-signer is usually relieved of his obligations once twenty-four regular payments are completed. With flexible loan limits, it is usually possible for someone to borrow as much as needed for college and no income requirements are asked of the borrower. Repaying the loan starts once you have finished college, allowing the student to concentrate on his studies. Payments made on interests due to student loans, however, could qualify for tax deduction once the borrower starts repaying for the loan.
Tags: for students
