Is it a Parents Plus Loan?  Only the parent borrower is required to pay back a Parent PLUS Loan, as only the parent signed the master promissory note for the Parent PLUS Loan. The student is not responsible for repaying a Parent PLUS Loan. They're under no legal obligation to do so.

Since the student is not liable for the interest, he can't deduct.  Since the parents aren't paying it, neither can they.  (Of course, the student might say that they payments are a gift to the parents, and let IRS figure out substance over form.)