Most of you are concerned about direct-to-consumer lending that bypasses certification by the financial aid office. Besides adding to the growing student loan debt, there is a potential tax implication for students that should be addressed.

According to the IRS, interest expenses for student loans are deductible when used for educational expenses, which are defined as expenses that are certified under the cost-of-attendance formulas used by financial aid offices.

Let’s say a student applies for loans through the school channel and covers the cost of attendance but then also arranges for an additional, non-certified, private loan for more than the certified amount. If that student tax-deducts the interest paid on that loan, that student has just unknowingly committed tax fraud.

Of course, the direct-to-consumer lender is protected in these instances. They will send the student a 1098E IRS form, reporting the amount of student loan interest paid with the famous fine print at the bottom: “This amount may or may not be deductible, consult your tax advisor.”