Frequently Asked Questions

Student loan interest accrues on a daily basis. To calculate your daily interest, your servicer divides your interest rate by 365 (the number of days in a year). They then multiply this daily interest rate by your outstanding principal balance. Because it accrues daily, making payments early in your billing cycle can slightly reduce the total interest you pay over the life of the loan.

Capitalized interest happens when unpaid interest is permanently added to your principal balance. This typically occurs at the end of a grace period, deferment, or forbearance. It matters tremendously because going forward, you will be charged interest on your new, higher principal balance (meaning you are paying interest on your interest). This is the primary reason why student loan balances can grow larger than the original amount borrowed.

Missing a payment puts your loan into 'delinquency'. If you miss a payment by even one day, you are delinquent. After 90 days of delinquency, federal loan servicers report the late payment to the major credit bureaus, severely damaging your credit score. If you remain delinquent for 270 days on federal loans, you enter 'default'. Defaulting leads to aggressive collections, wage garnishment, tax refund seizure, and a massive hit to your credit profile.

Yes! There are absolutely no prepayment penalties for federal or private student loans. You can make extra payments of any amount at any time, or pay off the entire balance in a single lump sum. Paying early is highly recommended because every extra dollar you pay goes directly toward the principal balance, saving you money on future interest charges.

Both allow you to temporarily stop making student loan payments, but they handle interest differently. During a deferment, the government pays the interest on Subsidized federal loans (though interest still accrues on Unsubsidized ones). During forbearance, interest accrues on all types of loans, and any unpaid interest will capitalize at the end of the forbearance period. Deferment is generally the better option if you qualify.

The IRS allows you to deduct up to $2,500 of student loan interest paid during the year from your taxable income. This is an 'above-the-line' deduction, meaning you don't need to itemize your deductions to claim it. However, it phases out based on your Modified Adjusted Gross Income (MAGI). High earners are not eligible for the deduction.

While it varies by lender, you generally need a credit score of at least 650 to qualify for private student loan refinancing. However, to access the lowest advertised rates, you typically need an excellent credit score (750+), a low debt-to-income ratio, and a stable, high-paying job. If your credit score is lower, you may need a creditworthy cosigner to get approved.

Yes, federal borrowers can switch their repayment plans at almost any time, completely for free, by contacting their loan servicer or visiting StudentAid.gov. If you are struggling with standard payments, you can switch to an Income-Driven Repayment (IDR) plan. However, keep in mind that any unpaid interest may capitalize when you switch plans.

If you enroll in an eligible school at least half-time, your federal student loans will automatically be placed into 'in-school deferment'. You won't have to make payments while enrolled. Subsidized loans will not accrue interest during this time, but Unsubsidized and PLUS loans will. Private loans have varying policies; some offer in-school deferment, but you must contact your private lender to ask.

Public Service Loan Forgiveness (PSLF) qualification is based strictly on who your employer is, not what your specific job title is, in order to get your remaining balance forgiven after 120 qualifying payments (10 years). Qualifying employers include U.S.-based government organizations at any level (federal, state, local, or tribal) and 501(c)(3) not-for-profit organizations. Labor unions, partisan political organizations, and for-profit government contractors do not qualify. You can use the PSLF Help Tool on StudentAid.gov to search for your employer.

Yes, they are different. Consolidation is a federal process that combines multiple federal loans into a single Direct Consolidation Loan with one monthly payment. The new interest rate is simply a weighted average of the old rates; it does not save you money on interest. Refinancing is a private process where a private lender pays off your existing loans and issues you a new private loan with a new (hopefully lower) interest rate based on your credit score.

You can apply for an IDR plan (like RAP, PAYE, or IBR — RAP replaced SAVE starting July 1, 2026) for free online at StudentAid.gov or by submitting a paper application to your loan servicer. You will need to provide your family size and your most recent tax return or proof of income. You must recertify this income and family size information every single year to stay on the plan.

Mathematically, the Avalanche method (paying off the highest interest rate loan first) is the best strategy because it saves you the most money and gets you out of debt the fastest. However, the Snowball method (paying off the smallest balance first) is excellent for psychological motivation. If you need quick wins to stay motivated, choose Snowball. If you want to maximize your savings, choose Avalanche.

Generally, no. Private student loans are not eligible for federal forgiveness programs like PSLF (which requires 120 payments) or income-driven forgiveness. Private lenders expect to be paid back in full. The only rare exceptions are in cases of death or permanent disability, and even then, policies vary drastically by lender. This is why you must be extremely cautious before refinancing federal loans into private ones.

The Saving on a Valuable Education (SAVE) plan was the most generous Income-Driven Repayment (IDR) plan for federal student loans, replacing the older REPAYE plan. SAVE protected up to 225% of the federal poverty guideline from the payment calculation and prevented unpaid interest from growing your balance. However, as of July 1, 2026, SAVE is being replaced by the Repayment Assistance Plan (RAP). RAP uses a sliding-scale income formula and is now the primary IDR option for new enrollees. If you were enrolled in SAVE, contact your servicer or visit StudentAid.gov to understand how your payments may change under the RAP transition.