This happens to me frequently. I'll say, "Oh you know that guy... uhh... I can't remember his name. But he starts with a 'Z'." You can remember part of the word but not the whole word.
Is there a term for this situation? What causes it?
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This is called the Tip of the Tongue phenomenon.
People in a tip-of-the-tongue state can often recall one or more features of the target word, such as the first letter, its syllabic stress, and words similar in sound and/or meaning. Individuals report a feeling of being seized by the state, feeling something like mild anguish while searching for the word, and a sense of relief when the word is found.
It's a very common phenomenon, and it presents itself in several similar forms, as the Wikipedia description notes. Remembering just the first letter is a common form but not the only cue.
There are a couple of suggested causes, but generally the problem is failure to completely retrieve information you "know" is in fact there. The Wikipedia article has some information on the general theories.