Student Loan Interest

Interest accrues (builds) daily on the unpaid principal balance. Calculate your daily interest accrual using the following example:

$25,000
6.8%
365
$4.66

The daily interest accrual is multiplied times the number of days between payments. If your next payment is due on March 25 and your last payment was made on February 25, your unpaid interest accrued for the March payment equals $130.48 ($4.66/day * 28 days).

Interest capitalization occurs any time unpaid accrued interest is added to the outstanding principal balance of the loan. Capitalized interest means more expense – it increases your loan principal, increases your monthly payment amount under most repayment plans and causes you to pay more interest throughout the life of your loan.

After a loan is disbursed

  • Unsubsidized Loans begin accruing interest as soon as the loan is disbursed.
  • Subsidized Loans* disbursed before July 1, 2012 begin accruing interest when your grace period expires.
  • Subsidized Loans* disbursed between July 1, 2012 and June 30, 2014** begin accruing interest when you stop attending school at least half-time.

* During a period of deferment, the government only pays toward accruing interest on subsidized loans.
** If you are a first-time borrower on or after July 1, 2013 and have exceeded 150% of the published length of your current program, you could potentially lose the subsidy on your subsidized loan while you are enrolled and during any grace or deferment periods.

Between payments

The amount of interest accrual varies with the number of days that elapse between payments.

An Interest Notice informs you about how much interest has accrued on your account. No action is needed when you receive an interest notice but the outstanding interest will capitalize if it is not paid. If you choose to pay the interest, your future monthly payments will be reduced and you will pay less interest throughout the life of your loan.

Payments are applied first towards any outstanding fees, then outstanding accrued interest, and the remainder to the principal balance. Payments received under the Income Based Repayment Plan will be applied first to interest, then any outstanding fees, and the remainder to the principal balance.