You only need to differentiate between graduate and undergraduate student loan interest if the interest you paid is more than $2,500.
Massachusetts allows 2 student loan interest deductions for interest paid on a "qualified education loan:"
- The federal deduction for both graduate and undergraduate student loan interest paid (Reported on Schedule Y, Line 10, has a $2,500 maximum amount allowed)
- The Massachusetts deduction for interest paid on a qualified undergraduate student loan (Reported on Schedule Y, Line 12, is unlimited)
Therefore the first $2,500 will be general student loan interest which is why you are not able to adjust it.
However, suppose you paid $5,000 ($1,000 graduate and $4,000 undergraduate) then you could claim $2,500 as general interest ($1,000 graduate + $1,500 undergraduate to get to the $2,500 federal cap) and the remaining $2,500 as undergraduate interest.
See: Student Loan Interest Deductions
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