What Increases Your Total Student Loan Balance?

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Several factors can contribute to an increase in your total student loan balance over time. Here are some common reasons:

  1. Accrued Interest: Interest accrues on most types of student loans while you're in school, during any grace period, and during deferment or forbearance periods. If this interest is not paid as it accrues, it will be capitalized, meaning it is added to the principal balance of the loan. As a result, you end up paying interest on the interest, which increases your total loan balance.

  2. Unpaid Fees: Some student loans may have origination fees or other types of fees associated with disbursing the loan. If these fees are added to the loan balance rather than paid upfront, they will increase your total loan balance.

  3. Deferment or Forbearance: If you're unable to make payments on your student loans and qualify for deferment or forbearance, interest may continue to accrue on certain types of loans. If this interest is capitalized, it will increase your total loan balance.

  4. Loan Consolidation or Refinancing: If you consolidate multiple federal student loans into a Direct Consolidation Loan or refinance your student loans with a private lender, you may end up with a higher total loan balance due to accrued interest, fees, or extending the repayment term.

  5. Income-Driven Repayment Plans: Income-driven repayment plans can lower your monthly payments by extending the repayment term. However, if your payments don't cover the accruing interest, the unpaid interest may be capitalized, increasing your total loan balance.

  6. Default: If you default on your student loans, collection fees and other penalties may be added to your loan balance, significantly increasing the total amount owed.

It's essential to understand how interest accrues on your student loans and to make timely payments to avoid capitalization of interest and additional fees that can increase your total loan balance over time. If you're having trouble making payments, contact your loan servicer to explore repayment options or alternative arrangements

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