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It details interest capitalization events at the end of grace, deferment, and forbearance periods, and how capitalization increases future interest. It also covers who sets federal loan interest rates and practical ways to save money, including paying interest before capitalization, using Auto Pay, and deducting eligible interest with Form 1098-E.",{"@graph":63,"@context":118},[64,80,101],{"@type":65,"itemListElement":66},"BreadcrumbList",[67,71,74,77],{"item":68,"name":69,"@type":70,"position":9},"https://docshare.wps.com","Home","ListItem",{"item":72,"name":10,"@type":70,"position":73},"https://docshare.wps.com/template/",2,{"item":75,"name":51,"@type":70,"position":76},"https://docshare.wps.com/template/general/",3,{"item":78,"name":59,"@type":70,"position":79},"https://docshare.wps.com/template/interest-and-taxes-student-loan-interest-capitalization-and-tax-saving-options/301505/",4,{"url":78,"name":59,"@type":81,"image":82,"author":87,"headline":59,"publisher":90,"fileFormat":93,"inLanguage":57,"description":61,"dateModified":94,"datePublished":95,"encodingFormat":93,"isAccessibleForFree":96,"interactionStatistic":97},"DigitalDocument",{"url":83,"@type":84,"width":85,"height":86},"https://docshare.wps.com/thumbnails/interest-and-taxes-student-loan-interest-capitalization-and-tax-saving-options/301505.png","ImageObject",442,249,{"name":88,"@type":89},"Violet","Person",{"url":68,"name":91,"@type":92},"DocShare","Organization","application/pdf","2026-09-22","2026-09-19",true,{"@type":98,"interactionType":99,"userInteractionCount":76},"InteractionCounter",{"@type":100},"ViewAction",{"@type":102,"mainEntity":103},"FAQPage",[104,110,114],{"name":105,"@type":106,"acceptedAnswer":107},"How does student loan interest accrue and why does it increase repayment costs?","Question",{"text":108,"@type":109},"Student loan interest is calculated as a percentage of your principal balance. The longer you take to repay principal, the more interest accrues, increasing the total amount you must repay.","Answer",{"name":111,"@type":106,"acceptedAnswer":112},"What is interest capitalization and when does it usually occur?",{"text":113,"@type":109},"Interest capitalization happens when unpaid interest is added to your unpaid principal balance. It typically occurs at the end of a grace period, deferment, or forbearance, which increases the principal used for future interest.",{"name":115,"@type":106,"acceptedAnswer":116},"How can borrowers estimate the amount of interest that will accrue?",{"text":117,"@type":109},"Use a simple daily interest calculation: unpaid principal balance × interest rate ÷ 365. 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Here’s what you need to know about interest, your taxes, and easy ways to save money.  \nStudent loan interest  \nWhen you take out student loans, you’re required to repay your principal balance (the amount you borrowed) plus interest. Interest is a percentage of your principal balance.  \n􀂃 The longer you take to pay off your principal balance, the more interest will accrue (gather) . This increases the total amount you need to repay.  \n􀂃 You pay less interest when you pay your loans down faster. So, you can save money if you pay more than your minimum balance each month – or whenever you can.  \n􀂃 Interest rates for U.S. Department of Education Federal Family Education Loan Program (FFELP) loans and Direct Loans depend on the type of each loan and the year you got each loan. To learn more, read the agreements and disclosures you got when you took out your student loans.  \nSimple daily interest calculation  \nYou can find the amount of interest that accrues on your loan by a simple daily interest calculation:  \nunpaid principal balance x interest rate ÷ 365 (days in the year) = approximate daily interest  \nIf you have many student loans, you likely have different interest rates for each.  \nmore on next page 􀁘  \nFor questions, call 800-722-1300. TDD/TTY users call 711.  \nCall Eastern Time, Monday 8 a. m.– 11 p. m., Tuesday through Friday 8 a. m.–8 p. m., and Saturday 10 a. m.–2 p. m. 1  \nVisit the Interest Estimator tool to learn how much interest is accruing on your loans in a given time period, using your current loan balances and interest rates:  \n􀂃 Log in to your account  \n􀂃 Go to the Tools & Requests page  \n􀂃 Select Interest Estimator  \n􀂃 Select the number of days up to 31 days in the future  \n􀂃 Select Calculate  \nCapitalized interest  \nInterest capitalization is when unpaid interest is added to your unpaid principal balance.  \nThis typically happens at the end of:  \n􀂃 Your grace period, the six months after you leave school or drop below half time  \n􀂃 A deferment, when your payments are postponed  \n􀂃 A forbearance, when your payments are temporarily suspended or reduced  \nDepending on your loan program and your agreement when you took out your loan, interest may also be capitalized during other periods when payments are postponed and in connection with certain repayment plans.  \nCapitalization will increase your principal balance. Future interest will accrue on that larger balance.  \nTo limit capitalized interest, you can pay your interest before it is capitalized. For example, you can pay the interest while you’re in school instead of waiting until after graduation.  \nYou can see any capitalized interest amounts in your Account History.  \nWho sets student loan interest rates  \nDirect Loans from the Department of Education  \nCongress sets interest rates on Direct Loans from the Department of Education through laws that tie the rate to financial markets. Interest rates are calculated each spring for new Direct Loans for the upcoming academic year –July 1 through June 30.  \nMost federal student loan interest rates are fixed for the life of the loan and do not change. Some loans have a variable interest rate that can change yearly.  \nYour student loan servicer does not set your student loan interest rate and cannot change it.  \nLoans through the Federal Family Education Loan Program (FFELP)  \nCongress also sets the interest rate for existing FFELP loans. New FFELP loans are no longer being made. The program ended in 2010.  \nFFELP loan interest rates are fixed for the life of the loan and do not change, or they are variable and can change yearly.  \nmore on next page 􀁘  \nFor questions, call 800-722-1300. TDD/TTY users call 711.  \nCall Eastern Time, Monday 8 a. m.– 11 p. m., Tuesday through Friday 8 a. m.–8 p. m., and Saturday 10 a. m.–2 p. m. 2  \nWays to save money  \nPay your interest before it’s capitaliz","cbCaibySukg2Z1Jf","https://ap.wps.com/l/cbCaibySukg2Z1Jf","pdf",630840,"English","# Student loan interest\n## Simple daily interest calculation\n## Capitalized interest\n# Interest rates and who sets them\n## Direct Loans\n## FFELP loans\n# Ways to save money\n## Pay before capitalization\n## Sign up for Auto Pay\n## Lower taxable income with Form 1098-E\n## Long-term interest calculation example","[{\"question\":\"How does student loan interest accrue and why does it increase repayment costs?\",\"answer\":\"Student loan interest is calculated as a percentage of your principal balance. The longer you take to repay principal, the more interest accrues, increasing the total amount you must repay.\"},{\"question\":\"What is interest capitalization and when does it usually occur?\",\"answer\":\"Interest capitalization happens when unpaid interest is added to your unpaid principal balance. It typically occurs at the end of a grace period, deferment, or forbearance, which increases the principal used for future interest.\"},{\"question\":\"How can borrowers estimate the amount of interest that will accrue?\",\"answer\":\"Use a simple daily interest calculation: unpaid principal balance × interest rate ÷ 365. The document also points to an Interest Estimator tool that uses current balances and interest rates for a selected number of days.\"}]","Interest and taxes - Student loan interest, capitalization, and tax-saving options | PDF",1789783112]