Why did my student loan balance increase?

AffiliatePal is reader-supported. When you buy through links on our site, we may earn an affiliate commission.



Student loans are a common method for financing higher education, allowing individuals to pursue their academic goals without immediate financial burden. However, it can be disheartening to discover that your student loan balance has increased. Various factors can contribute to this increase, and understanding them is crucial for borrowers. In this article, we will explore the reasons why your student loan balance may have increased and provide insights into each factor.

Changes in Interest Rates

Interest rates: One of the primary reasons for an increase in student loan balance is changes in interest rates. Student loans typically accrue interest over time, and if the interest rate on your loan increases, it can result in a higher balance. This increase can occur due to changes in the overall economy or adjustments made by the loan servicer. It is essential to stay informed about any changes in interest rates to understand how they impact your loan balance.

Accrued Interest During Deferment or Forbearance

Deferment and forbearance: If you have placed your student loans in deferment or forbearance, it means that you have temporarily paused or reduced your loan payments. However, interest may continue to accrue during this period, resulting in a higher loan balance. This accrued interest is typically added to the principal balance once the deferment or forbearance period ends. It is important to carefully consider the implications of deferment or forbearance on your loan balance and explore alternative options if possible.

Capitalization of Interest

Capitalization: Another factor that can contribute to an increase in your student loan balance is the capitalization of interest. Capitalization occurs when the unpaid interest on your loan is added to the principal balance. This usually happens at specific intervals, such as when you enter repayment after graduation or when you switch repayment plans. When interest is capitalized, it becomes part of the principal balance, and future interest calculations are based on this higher amount. Understanding when and how interest capitalizes can help you manage your loan balance effectively.

Unpaid Fees or Penalties

Fees and penalties: In some cases, your student loan balance may increase due to unpaid fees or penalties. These fees can include late payment fees, collection costs, or origination fees. If you fail to make timely payments or neglect to fulfill specific loan requirements, additional fees may be added to your balance. It is crucial to review the terms and conditions of your loan agreement to understand any potential fees or penalties and ensure prompt payment to avoid unnecessary increases.

Changes in Repayment Plan

Repayment plan: If you decide to change your repayment plan, it can impact your loan balance. Some repayment plans, such as income-driven repayment, may extend the repayment period, resulting in more interest accruing over time. Additionally, switching to a different repayment plan may involve recalculating your monthly payments, which can affect the allocation of principal and interest. It is essential to evaluate the long-term implications of changing your repayment plan to make an informed decision.


Understanding why your student loan balance has increased is crucial for effective financial management. Factors such as changes in interest rates, accrued interest during deferment or forbearance, capitalization of interest, unpaid fees or penalties, and changes in repayment plans can all contribute to an increase in your loan balance. By staying informed, reviewing your loan terms, and exploring repayment options, you can better manage your student loan debt and work towards financial stability.


– Federal Student Aid: studentaid.gov
– Consumer Financial Protection Bureau: consumerfinance.gov
– U.S. Department of Education: ed.gov