What affects your total student loan cost

Aside from the amount you borrowed, other factors can increase the total cost of your student loan in the long run.

How interest on private student loans works

  • When you apply for a loan, you’ll be given an interest rate, which is the rate charged to borrow money.
  • When you borrow money, you pay it back with interest, so you end up paying back more than you borrowed.
  • Interest starts to accrue (grow) the day your student loan funds are disbursed (sent to your school).

We offer two types of interest rates to Smart Option Student Loan® customers—variable and fixed. A variable interest rate may go up or down due to an increase or decrease to the loan's index. Variable interest rates usually start out lower than fixed rates, but can change, so your monthly student loan payments may vary over time. A fixed interest rate stays the same for the life of the loan. This means you’ll have predictable monthly student loan payments.

Other factors that could affect your total student loan cost

Late fees
Loan servicers may charge a fee if a payment is late. This can further affect your student loan costs. To help avoid late payments, set up auto debit. Your payments will be automatically deducted from your bank account at the same time every month. Just make sure you have enough money in your account each month to cover your payments.

Payment-related fees
Loan servicers may charge a fee for returned checks or insufficient funds in your bank account.

Variable interest rates
Variable interest rates may go up or down due to an increase or decrease to the loan's index. This may impact your monthly payments and total student loan cost. If you’re looking for predictable monthly payments, consider a fixed interest rate. But keep in mind that you could have higher monthly payments with a fixed interest rate than you would with a variable interest rate.

When does interest start on a student loan?
If you choose a loan that does not require you to make payments while you’re in school, interest will keep adding up and will increase your total student loan cost. Choosing a repayment option where you make payments while in school will help reduce your total student loan cost.

Deferment and forbearance
A deferment allows you to temporarily suspend payments on your student loan under certain circumstances, which may include going back to school, or enrolling in an internship or residency program. Keep in mind that while in deferment, interest may keep adding up and increase your total student loan cost.

Forbearance may let you temporarily postpone your loan payments. It can help you avoid delinquency and default if you're facing temporary financial difficulty. While you’re in forbearance, you may not have to make payments. However, interest may continue to accrue. At the end of your forbearance period, the interest may capitalize (be added to your loan’s principal), so your total loan cost may increase.

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