the 1098 -e tax form is based on?

Question

is it based on accrued interest or capitalized interest?

and yes there is such thing as " capitalized interest" it states it in my sallie mae loan.

Answer 1

The 1098E shows interest paid by the student on the student loan, not the interest that has accrued on the loan.

The loan payments are divided into principal and interest. All of the interest is deductible as interest, but some of the principal may also be deductible as interest. Part of the principal that may be deductible as interest comes from loan origination fees that were added to the loan, and capitalized interest, which is unpaid interest that is added to the principal.

If there is any such "capitalized interest" the student may deduct that part of his payments which represent payment of the capitalized interest. The 1098E will indicate whether any of the interest is a payment of a loan origination fee or capitalized interest.

Answer 2

It's interest actually paid and received by the lender from the borrower. There's no such thing as "capitalized interest."