Did you claim your daughter as a dependent in the current year? If you did, then you can claim the Staffford loan interest as a deduction. You need to respond to the IRS by providing them the documentation on your daughter's student loan and indicating she was claimed as your dependent. If you did not claim your daughter as a dependent, then you need to pay the tax and have your daughter file an amended return.
If the Stafford Loan is solely in the daughter's name, the mother cannot deduct the interest, even if she claims the daughter as a dependent because she is not legally liable for the loan. If she can prove to the IRS that she is legally liable to payback the loan, she can deduct the interest. This is on page 44 of Pub 970.