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Parent Handbook: How Student Loan Interest Works

If you or your student use loans to help pay for college, you will need to pay some form of interest on the loans.

It’s vital to understand not just what your interest rate on a student loan is, but all of your repayment terms, so you can stay on track to repaying the loan. And perhaps find ways to pay extra to help cut back on the total interest you end up paying.

See more tips to help families of students in grades 6–12 prepare for success in college and other postsecondary options in the Parent Handbook.

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Interest can add up fast and weigh you down with additional debt. But by paying down the interest as it accrues during school, you can reduce your debt and the total amount you carry with you to graduation.

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Unpaid interest can capitalize (be added to) your principal balance and can significantly increase your loan balance from the time you take out a loan until you begin repayment.

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If you have some extra cash from earnings, gifts or your own savvy shopping skills, you may want to invest in your financial future by making an interest payment on your student loans.