Form 1098-E is wrong? I made no payments in 2021.

[bs261]

I made no payments in 2021 on my federal direct loans due to the pandemic pause on interest accrual and payments. 

My loan servicer sent me a 1098-E that says I paid interest. Shouldn't this be $0?

[FangxiaL]

Per the IRS Specific Instructions for Form 1098-E, box 1 interest includes capitalized interest. If the amount is $600 or more, the lending institution is required to report it on Form 1098-E. 

capitalized interest is tax deductible for the year in which you paid it.  You can only claim the tax deduction for interest after it’s been paid, not before.

Since you did not make any student loan payment and you did not pay the capitalized interest in 2021, do NOT take the student loan interest deduction on your 2021 tax return.