# Calculation of interest paid on educational loan for tax rebate

I have repaid rs 34000/- towards my educational loan so far in this year. How can I calculate the interest which is paid so that I can use that for tax rebate? When I asked the bank to provide me the tax
certificate, they simply added the interest charged to my account so far in the year!! But this is the incorrect amount to be used for rebate as that is for the interest paid and not the interest charged. Can somebody suggest how is the interest calculated from the repayment?
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I'd bet the bank applies the \$34K you paid toward interest. So unless your interest charged is greater than \$34K (and if it is, I don't want to know what your student loan balance is), deduct the amount they said they charged, on the theoretical reality that you already paid it.
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Paul A. Thomas, CPA
Watkinsville, Georgia
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Paul Thomas, CPA wrote:

Are there normal (read that "not interest only") which don't amortize like normal loans? Even a 30 yr mortgage has some portion of the payments going to principal. How can a bank apply toward interest which hasn't accrued yet? Joe
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I'm not sure where you're headed. The OP stated "they simply added the interest charged to my account so far in the year" and that he paid about \$34,000 toward the loan. Most lenders apply the payment to the interest FIRST, then toward the principal, so unless they tell him the accrued interest (ie: "charged to my account") was more than the \$34,000, then all the accrued interest was paid - and most likely that amount is less than the \$34,000.
It's possible that there remains some accrued (ie: charged to his account) interest that hasn't been paid as of year-end, ie: accrued in December but paid in January. Depending on the frequency of his payments and the remaining balance, this amount may be insignificant, but it could also be rather large. The very long run is, that he'll never pay more in interest than gets accrued.
Each month on my mortgage, as with all normal mortgages, the payment (whatever amount that ends up being) goes to the accrued interest first, with the remainder going toward the principal balance. The accrued interest for December is being paid with the January payment. At least that amount of "accrued" interest remained unpaid as of December 31st.
If my January payment is \$2000, of which \$1500 would be applied to accrued interest and \$500 toward principal, a payment of \$3000 would result in \$1500 going toward accrued interest (that number can't change) and \$1500 going toward the loan balance.
The only people who will know the disbursement dates from the loan and the payment received dates from the lender and the interest rates charged and the interest rules **meaning the lender** are the only ones who will be able to compute the interest paid by the borrower. They should be sending a statement on student loan interest by the end of January. I suspect it'll not be different from the number he's getting from them now. And of course, he'll never know if it's right or wrong, it'll be the number that gets used.
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Paul A. Thomas, CPA
Watkinsville, Georgia
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This whole discussion could be moot:
The student loan interest deduction (actually an adjustment to income) is capped at \$2,500.
Anyone who can afford to pay off \$34,000 in one year probably exceeds the \$80K/\$160K AGI cap.
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Don EA in Upstate NY

> I'm not sure where you're headed. The OP stated "they simply added the
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Don Priebe wrote on 1/12/2009 2:57 PM:

Note that the original poster ( snipped-for-privacy@gmail.com) said:

The "rs 34000/-" and email address (rahuljodhwani.pune) tells me that this poster is probably from India and "rs" refers to the Indian currency Rupees aka INR. That is not USD
I am afraid I am not familiar with Indian tax laws enough to answer the original questions, though
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On Jan 12, 8:11�am, snipped-for-privacy@gmail.com wrote:

You will need the following information: 1) Loan balance at beginning of year 2) Loan balance at end of year 3) Total of all payments made during year
Subtract 2) from 1). That is the amount of loan principal paid during the year. Subtract this number from 3). The result is the amount of INTEREST you paid during the year.
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