I understand you can deduct interest pain on student loans. So lets say that after all my taxes are filed I am getting a return of $500. If I then pay $1000 in interest (before 12/31), will I get all that back on my return?
No. It's a deduction, not a credit. Assuming you meet income requirements (which, as a fellow, you probably do; do you have a high earning spouse?), you can deduct the $1000 in interest paid (up to $2500) from the income that is used to calculate the taxes you owe (AGI). So you'll save something like an additional $200-300, depending on your income tax bracket.
is completely correct.
It comes down to understanding the difference between a tax credit (better) and a tax deduction (still cool, but not AS good). This is why I try to always pay enough on my loans each year to get up to the complete amount of interest I can deduct (I think it's either 2k or $2500).