Student Loan Interest paid in '06

[mylittlelo]

Hi there,

I'm wondering if anyone here knows the answer to this.... I paid over $3000 towards my student loans in 2006. Some payments were direct to the Dept Of Ed, some were through rehab. When I look at my account history in Direct Loan Servicing, it shows $400 was applied to interest. Yet, the 1098-E from Direct Loans shows only $85 in "eligible interest". What is this difference?

 

FYI, I file joint, AGI will be around $38-40 I believe. One child.

 

Any help is appreciated before I call DL Servicing...

 

Thanks!

[Jeffmo32]

I have had this happen before. I never investigated.

 

You say that you're rehabing these loans - so my best educated guess would be that the interest that is missing (Under reported on the 1098) is actually interest that is attributed to other things such as capitalized late payment, fees, fines and or interest.

 

I hope that makes sense.

 

Again, edumacated guess. I would be interested to hear the truthful answer from the lender and see how they calculated it.

Edited January 23, 2007 by Jeffmo32

[mylittlelo]

Could have been interest paid on top of fees I guess....darn!

 

I'll give them a call and see what they say.

 

Thanks!

[Cynic]

Could have been interest paid on top of fees I guess....darn!

 

I'll give them a call and see what they say.

 

Thanks!

 

 

The bottom line is that not all interest paid is eligible.

 

The IRS has a booklet that explains all the conditions, restrictions, etc.

 

If the holder of your student loans has half a brain, they will politely refuse to offer tax advice (including explaining and interpreting federal tax code) and tell you to contact a reputable accountant.

[mylittlelo]

Just an update. I didn't call, but received TWO 1098-E's in the mail from them. I am thinking one was from payments made to DCS when in rehab, and the other for payments made since the loan was rehabbed. So there were two amounts, both eligible for tax deductions. Phew. Thanks for your advice!

[Chi-Chi]

Just an update. I didn't call, but received TWO 1098-E's in the mail from them. I am thinking one was from payments made to DCS when in rehab, and the other for payments made since the loan was rehabbed. So there were two amounts, both eligible for tax deductions. Phew. Thanks for your advice!

 

I was going to say the same thing, I received two letters one the standard 1098-E form and one in a letter w/ 1098-E written on it explaining that this amount of interest was paid during the time my loan was in default and does not reflect any other interest paid while not in default. It also stated that I may receive another 1098 for such. Lastly it said that it does not imply that I have a defaulted loan nor do I necessarily have a loan still but that this amount was the amount that was paid while in default! I didnt even know I could claim this on my taxes till I read the letter i'm glad I did!