next »

[zarathustra]

Maybe you all can advise me...

In the process of preparing my taxes, I noticed my 1098e form amount was radically different this year.  Normally, I can deduct over $1000 from taxes paid on my student loans.  This year, my 1098e declared I can only deduct $97 in interest paid from my taxes.  It's not like I'm anywhere near done paying my loans (still owe about $28,000), so I called the Federal student loan service people. After 30 minutes on the phone, they said that a portion of my student loans were at 0% for awhile (about 4 years) and that about $687 of interest was recapitalized in November, and to make up for what I didn't pay in interest, my tax deductible interest is lower.  I asked if my 1098e would be "normal" next year, and they said they wouldn't know until June.

Does this sound right?  And maybe this is a silly question, but why should I pay for their error?  Or shouldn't they at least have notified me in November when this interest was recapitalized?  My monthly payment amount did change by maybe $4, but that happens periodically and thought it was the result of interest rates changes. 

I suppose not getting the tax deduction is better than receiving a lump sum bill...I think...

Just wondering if anyone else has had an experience like and had any success in appealing.

[prytania3]

I don't know much about student loans, but it sounds like you were getting a deduction when you were really paying no interest. Now it's getting evened out. I wouldn't necessarily say it's their mistake so much as it's how they do things.

But you can always the student loan people again. You might get someone who can give you better information.

[zarathustra]

I don't know much about student loans, but it sounds like you were getting a deduction when you were really paying no interest. Now it's getting evened out. I wouldn't necessarily say it's their mistake so much as it's how they do things.

But you can always the student loan people again. You might get someone who can give you better information.

Yeah, I was kinda figuring that.  We'll see what the tax guy says tomorrow at my appointment.  Bad news might be a bigger motivator to find out what happened. 

[bread_pirate_naan]

they said that a portion of my student loans were at 0% for awhile (about 4 years)

Are your loans the subsidized ones?  Any chance you we enrolled in a grad program during those years?

and that about $687 of interest was recapitalized in November, and to make up for what I didn't pay in interest, my tax deductible interest is lower.

They'd better come up with some paper to that effect.  Any interest you paid is deductible.  They can't deduct from interest you paid for interest they didn't charge.   You paid period.  All of that is deductible.  Depending on your debt, that $687 number might be way off.

Does this sound right? 

No.

And maybe this is a silly question, but why should I pay for their error? 

If they capitalized the interest, your principle would go up and you would be able to deduct the increased interest as you paid it.  You are paying this year's taxes.  The only error they can charge you for are the years when your 1098e should have been zero and they reported something different on your 1098e.  Timespan, key.  Your 109098e is the record of your payment, so if it was off, they need to provide you with documentation to support that.  Logically, if you weren't being charged, the interest reported on the 1098e would be zero.

Or shouldn't they at least have notified me in November when this interest was recapitalized? 

No, they aren't that responsible.  The govt will screw you.  It's a bureaucracy.  You want to find out the years, consult your accountant, find out what sort of documents they need to provide, and make sure the amount they have capitalized, if any, is correct.  It sounds like they are way off course.   

My monthly payment amount did change by maybe $4, but that happens periodically and thought it was the result of interest rates changes. 

??? Why?  You want to understand that too.  Do you have an monthly payment that is tied to interest rates?  I am not familiar enough with varieties of repayment to comment.

Just wondering if anyone else has had an experience like and had any success in appealing.

I would file an extension if I were you, to get the time to unravel it.  This sound ridiculous.

[zarathustra]

they said that a portion of my student loans were at 0% for awhile (about 4 years)

Are your loans the subsidized ones?  Any chance you we enrolled in a grad program during those years?

Yes, subsidized and consolidated.  I went into Income Contingent repayment when I got my job and dropped below fulltime enrollment.  But my loans are from my master's degree in the 90's, so I enrolled in the doctorate while it was in forebearance, but not at the time they said a portion of the loan was mistakenly at 0% interest.

and that about $687 of interest was recapitalized in November, and to make up for what I didn't pay in interest, my tax deductible interest is lower.

They'd better come up with some paper to that effect.  Any interest you paid is deductible.  They can't deduct from interest you paid for interest they didn't charge.   You paid period.  All of that is deductible.  Depending on your debt, that $687 number might be way off.

From what I understand, they thought I was paying interest, so they quoted an amount that I could deduct on my 1098e for 4 years, but were wrong....?  But it doesn't make sense to me that $687 would be recapitalized AND I'd lose money I could deduct.  

Does this sound right?

No.

And maybe this is a silly question, but why should I pay for their error?  

If they capitalized the interest, your principle would go up and you would be able to deduct the increased interest as you paid it.  You are paying this year's taxes.  The only error they can charge you for are the years when your 1098e should have been zero and they reported something different on your 1098e.  Timespan, key.  Your 109098e is the record of your payment, so if it was off, they need to provide you with documentation to support that.  Logically, if you weren't being charged, the interest reported on the 1098e would be zero.

But it was only a portion of the loan that was zero.  How it can be a portion of a consolidated loan (and one that's been consolidated since the 90's) is what I don't understand.  

Or shouldn't they at least have notified me in November when this interest was recapitalized?

No, they aren't that responsible.  The govt will screw you.  It's a bureaucracy.  You want to find out the years, consult your accountant, find out what sort of documents they need to provide, and make sure the amount they have capitalized, if any, is correct.  It sounds like they are way off course.    

My monthly payment amount did change by maybe $4, but that happens periodically and thought it was the result of interest rates changes.

??? Why?  You want to understand that too.  Do you have an monthly payment that is tied to interest rates?  I am not familiar enough with varieties of repayment to comment.

Yes, it's tied interest rates.  It can't go higher than 8%, or something, has gone down.  

Just wondering if anyone else has had an experience like and had any success in appealing.

I would file an extension if I were you, to get the time to unravel it.  This sound ridiculous.

I wonder if my tax guy can help me with it?

[bread_pirate_naan]

He should be able to, but I would ask for paper-based documentation of everything regardless.  He can't really help you without a paper trail.  If you can understand the paper, don't pay him to go over this with you.  Sorry to hear about this.  Refund time is my most religious of holiday seasons.

I had a similar interest situation with a payroll overpayment that I was unaware of.   I thought it was paid out sick/vacation time, and I had moved.  It went into collection and they were inaccurately calculating the interest, which was accruing while I fought them.  It was miserable. 

You shouldn't have that problem here.  They may have made a mistake in your favor once you work out what really happened.  If that's the case, don't fight their error.  Take the hit and make sure that it won't affect you later.  If they can't tell you what's supposed to happen in the future, they don't really know what's going on.