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Payments, Interest and Fees

How is student loan interest calculated?

Most student loans (including all federally guaranteed loans) use a method of interest accrual known as "simple interest." The difference between simple interest and compound interest (the type of interest that accrues on most major credit cards) is that simple interest is only calculated on the principal balance, not on the previously accrued interest.

To calculate your daily interest accrual, use the following formula: (Current Principal Balance x Interest Rate) ÷ 365.25 = Daily Interest.

This formula says to multiply your current principal balance by the interest rate and then divide the result by 365.25. The result is your daily interest accrual, or how much interest you would pay for one day. You can multiply this number by a specific number of days to calculate your interest accrual over a certain amount of time.

Example:

Current principal balance: $20,000.00
Interest rate: 4.50%
Days of interest needed: 30

Just plug in the numbers to calculate the approximate 30-day interest accrual: [(20,000 x .045) ÷ 365.25] x 30 = $73.92. You may view your unpaid accrued interest via Manage My Account.

What does it mean when interest is capitalized? When does it occur?

Interest accrues daily on your loan including times when a payment is not required to be made on a loan such as deferment, forbearance, grace, and in-school statuses. Accrued interest is usually capitalized (added to the principal balance) when the loan goes into repayment thereby increasing the total outstanding balance due and the amount of interest which accrues daily.

Because interest continues to accrue on the principal balance if a payment is not made, any future interest that accrues after capitalization will be based on the new outstanding principal amount (previous principal balance plus capitalized interest). Therefore, capitalization increases the total cost of your loan.

You can avoid the cost of capitalization by making payments during any period when they are not due. For certain federal student loans, including unsubsidized, Parent PLUS and GradPLUS loans, federal law permits unpaid interest to be added (capitalized) to your principal balance at certain times during your loan term. These times where unpaid interest may be capitalized can include after your grace period, at the end of deferment, and at the end of forbearance.

For private loans, consumer law permits unpaid interest to be capitalized at the frequency stated in the terms of the agreement that you signed when you obtained the loan.

I'd like to make a payment only to interest. How can I do that?

If your payments are currently suspended due to deferment or forbearance, it will benefit you to continue making payments on the interest that accrues to avoid capitalization. To determine the amount of unpaid interest, first log into Manage My Account and select "Current Balance." The amount of unpaid accrued interest is listed under "Accrued Interest." If you have several groups, you can select each group to see group-specific accrued interest.

Any payment you make will, per regulation, be applied first to outstanding interest, unless late fees* are assessed, then your principal balance. Interest accrues daily; therefore, the amount of unpaid accrued interest changes daily. Any amount paid above interest accrued and late fees (if applicable) will be automatically applied to the principal balance.

*The U.S. Department of Education does not assess fees for late payment of Federal Direct Loans.

What fees could potentially be added to my account?

Some lenders charge a late fee* if you do not make your payment on time. Usually, these fees are charged as a percentage of your monthly payment. Many lenders provide for a grace period before they charge a late fee. For example, if the lender's grace period is five days, a late fee would be charged six days after the payment is due, if a payment has not been received.

*The U.S. Department of Education does not assess fees for late payment of Federal Direct Loans.

Can I pay more than my minimum scheduled monthly installment amount each month?

Yes. If you want to pay more than your minimum scheduled monthly installment amount each month, simply enter the additional amount to be debited in the "Additional Amount" field when setting up KwikPay® (automatic debit) in Manage My Account (MMA). The "Total Monthly KwikPay Amount" will include the "Additional Amount." If you are already on KwikPay, you may edit your settings via MMA. Note that the extra amount will be automatically applied proportionately to all loans and cannot be targeted to a specific group.

If you wish to make extra payments without KwikPay, you may do so manually online through Manage My Account (MMA). You can also target payments toward a specific group in MMA. If you wish to be billed for a higher payment, you may contact us to request a shortened repayment term (note that by requesting a reduced term, you will be required to pay the disclosed installment amount).

NOTE: If you are on KwikPay and you target an extra payment to one or more group(s), it may pay that group ahead (i.e. you may advance the due date of that group) and affect the application of future payments. If you have multiple groups and are on KwikPay, our servicing system will attempt to keep the due dates of your groups aligned. If a group is paid ahead, future payments will be applied to the other groups rather than to each group's minimum installment. If you wish that an extra payment not pay ahead your account, please contact us after an extra payment is made to request that we remove the paid ahead status. If you are paying more than twice the amount of a group's installment, you may select the "do not advance due date" option within Manage My Account to prevent the group from being paid ahead. If the subsidized and unsubsidized portions of your consolidation loan are grouped together, you can contact us to request the extra payment to be targeted to either the subsidized or unsubsidized portion.