Fast Fact

Almost $1 in every $4 that students borrow comes from alternative (private) loans.

Source: National Consumer Law Center

About Interest

Understanding interest is essential to understanding how your student loan works. Interest accrues on a student loan every single day, even if the account is not in repayment.

What is interest?

Interest is a fee an individual pays for the use of borrowed funds. When an individual enters repayment, he or she must repay not only the principal (amount originally borrowed) but also an additional fee of interest on that borrowed money.

When does interest accrue?

All student loans accrue interest:

The key is to understand who is responsible for paying the interest that accrues. You are responsible for paying all the interest that accrues on your unsubsidized loan from the date of disbursement. Any unpaid interest that remains at the end of an in-school, deferment, forbearance or grace period will be capitalized (added to the principal balance of your loan).

The government will pay the interest on your subsidized loan while you are in-school, during your grace period, and during authorized periods of deferment for any subsidized loan disbursed prior to July 1, 2012. You are responsible for the interest that accrues on your subsidized loan during grace if it was disbursed on/after July 1, 2012 and prior to
July 1, 2014.

Calculating accrued interest

To calculate your daily interest accrual, use the following formula:

Interest rate x current principal balance ÷ number of days in the year = daily interest

Example

Sara Student has a $10,000.00 current principal balance and 6% interest rate this year. Using the formula:

.06 x $10,000.00 ÷ 365 = 1.6438356… (round to $1.64)

What happens to accrued interest

Any outstanding interest that remains on your loan at the end of a specific period, such as a grace, deferment, or forbearance period will be capitalized (added to the principal balance of your loan).

What is an interest notice?

Let us show you the benefits of paying interest. Review our information to see if this option is right for you.

What is an interest bill?

Let us show you the benefits of paying interest. Review our information to see if this option is right for you.

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