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Author: TMFTaxes Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 120812  
Subject: Re: Student Loan Interest Deduction Date: 2/8/2000 8:43 PM
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<<Here's the situation: I was granted a forbearance on my federal Stafford loans for the first year that I was supposed to have been paying, and roughly $1,200 in interest accrued during that time. Then I made my first monthly payment in December 1999, as well as advance payments for January through March, totalling $704.64 paid in 1999 (I even checked to make sure they deposited the checks in December).>>


<<The section on student loan interest deduction in "J.K. Lasser's Your Income Tax 2000" tells me: "Loan origination fees and capitalized interest can be counted as interest paid," because, "in general, a payment regardless of its label, is trated first as a payment of interest to the extent that accrued interest remains unpaid." So the whole $704.64 should qualify as deductable on my 1040, right? Right?>>

Generally speaking, I would agree...

<<BUT... Last week I received from the lender a "Student Loan Interest Statement" (form 1098-E) which shows only $83.07 in student loan interest received.>>

So your only option is to discuss this issue with the folks holding your loan, and find out EXACTLY what they did and how they did it. It's possible that they could be incorrect. But the only way you'll know is to deal directly with the lending company to see how they computed the interest. As noted in the Lasser book, the lending company may call it one thing, but you might be able to call it something long as you can PROVE it.

<<What gives? Is the lender adding things up wrong? Am I misunderstanding the rules? Is Lasser full of you-know-what?>>

I think that you'll have to deal with the lender directly to see how they did THEIR computations.

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