Hello,

My wife just finished law school, passed the bar, and is working for a firm. She has a combination of federal and private loans with unfavorable interest rates and we have been approved for a refinance at much better rate through a new lender.

My question: one of the two loans has been building up interest from when she first started school. I would like to ensure that we are able to deduct this interest from our taxes and am curious what the right approach is. If the refinance takes the full amount of what we owe, will the new loan roll that built up interest into the principal of the new loan and prevent us from being able to deduct it? The new lender claims that we will get a 1098 form from the first lender that shows we paid this interest. I am trying to independently verify this information and find out if we will be able to deduct this interest from our taxes even though it was paid off by a new loan and not directly from us.

Thanks for any info you can provide.