The Value of Accurate Information

Recently, I began using the website provided by my student loan consolidator to track my progress on paying off the $51,000 I began owing in 2005. I’m down to about $47,000 now – which is nice progress, all things considered.

One nice benefit I began receiving in 2005 too was the tax benefit of being able to deduct student loan interest. In 2005, I can verify I paid over $500 in interest (and thus saved almost $100 in federal taxes).

For 2006, I lost my 1099 from the consolidator, and thus had to estimate how much interest I paid. So I guessed a low-balled $800, since 2005 was only a partial year. Turns out, in using that website I discovered I had in fact paid over $2300 in student loan interest in 2006. I had forgotten that I had also not consolidated until a few months after beginning to pay the loans, so I “misunderestimated” that.

The upside of this favorable error is that I overpaid in federal taxes and I am owed a new refund of about $389, assuming the IRS doesn’t object for some reason. I’ll probably use the refund to pay off some debts, but given that my student loans are locked in at 3.625%, the debts I pay off will probably be credit cards.