Then it subtracts any aid, such as a Pell Grant, scholarship or loan, the family expects the student to receive.

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In 2007, Congress increased the Pell Grant, the federal scholarship for low-income students, and reduced the cost of need-based student loans.

FORBES: U.S. Rep. George Miller

Or they could weight financial aid differently, with more scholarship or grant aid frontloaded and loans comprising larger percentages towards the end.

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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 savings account funds such as a Coverdell education savings account, tax-free savings bond interest or employer-provided education assistance.

FORBES: Back to School: Tuition and Fees Deduction