You can use money that you borrow in order to calculate the deduction but you cannot claim a deduction or credit based on expenses paid with tax-free scholarship, fellowship, grant, or education savingsaccount funds such as a Coverdell education savingsaccount, tax-free savings bond interest or employer-provided education assistance.
The fastest-growing type of plan today is a high-deductible plan that includes a Health SavingsAccount, which lets families save money, tax-free, for out-of-pocket health costs.