Interest FAQ
Understanding Interest
How does interest accrue on my student loan?
Interest accrues daily on your student loan from the day it's disbursed until the day your loan balance reaches zero.
We use a simple formula to calculate your daily interest accrual:
Interest rate × current principal balance ÷ number of days in the year = daily interest
What does capitalization mean?
Find the definition in our glossary.
What happens to my monthly payments if I have both loans with fixed interest rates and loans with variable interest rates?
Having loans with fixed and variable interest rates may affect the amount of your monthly payments. For example, your monthly payments for loans that have fixed interest rates remain more or less the same until the loans are paid in full. (The monthly payment amount may increase any time there is capitalization of interest.)
However, your monthly payments for variable interest rate loans may change due to potential interest rate changes every July 1.
| If the interest rate… | Then… |
|---|---|
| Increases | Your monthly payments may increase. |
| Decreases | You may be able to pay off your loan earlier than anticipated. |
Does interest accrue on my loan while I have a deferment or forbearance?
Yes. Interest accrues on your loan, but you may not be responsible for paying it. It depends on the type of loan you have and whether you have a deferment or forbearance.
| If you have a deferment… | If you have a forbearance… |
|---|---|
|
Subsidized loans—The government pays the interest that accrues. Unsubsidized loans—You are responsible for paying the interest that accrues. |
All loans—You are responsible for paying the interest that accrues. |
If you are responsible for paying the interest that accrues, you will receive an interest notice 20 days before the end of your deferment or forbearance advising of the total amount of outstanding interest. Any interest that you do not pay will capitalize (be added to your principal balance) when the deferment or forbearance ends. Capitalization increases your principal balance, meaning you will pay more over the life of the loan.
Changes in Interest Rates
How do I know if my interest rate increases?
We will notify you before July 31. We will either send you a letter or change the interest rate on your monthly billing statement.
You can also view your interest rate and get other detailed information about your loans in Account Access.
If my interest rate increases, will my payment increase?
Usually, monthly payments change only to ensure you can pay off your student loans within the specified time frame.
| If the interest rate increases and… | Then your monthly payment… |
|---|---|
| Your current monthly payment does not allow for you to repay your loans within the specified time frame | May increase |
| You can repay your loans on schedule | Will not change |
Can I change my interest rate?
No. But you can reduce your interest rate by 0.25% if you sign up for Direct Debit.
Interest Payments
What is an interest notice?
An interest notice differs from a bill in that you're not required to make a payment. We will send you an interest notice approximately 20 days before your grace period ends or before a deferment or forbearance ends.
You'll receive an interest notice unless you specifically requested to make interest payments while you are in school or your loan is in grace, deferment, or forbearance. If you want to pay interest during these times, please send us a letter requesting this, and we will send you a quarterly interest bills instead of an interest notice.
I am still in school. Why haven't I received any bills or notices regarding the interest on my loan?
Unless you specifically requested to be billed for the interest on your loans, we will send only one interest notice to you approximately 20 days before your grace period ends.
If you want to find out how much interest has accrued on your loans or make interest payments, sign in to Account Access, our online account management tool.
Can I make interest payments even if I do not receive a bill?
Yes. If you have an unsubsidized loan, making interest payments while you are in school can minimize the amount of interest that will capitalize (be added to your principal balance) when your account enters repayment. And you will pay less over the life of the loan.
Do I need to pay interest on my loan while in school?
It depends on what type of loan you have:
- Subsidized Loans—No. The government pays the interest on your loan while you are in school.
- Unsubsidized Loans—No. It is not necessary to pay the interest while you are in school or while you have an in-school deferment. However, paying interest early, before you have to, saves you money in the long run. Any interest that you do not pay during this period will be added to your principal balance (through capitalization). Because capitalization increases your principal, you end up paying more in interest, which leads to more overall costs.
- Parent PLUS Loans—You can postpone making monthly payments on your loans while the student is enrolled at least half time and for 6 months after the student is no longer enrolled. Interest accrues from the day of disbursement. If you do not pay this interest, it will be added to your principal balance prior to your loans entering repayment.