You’ve been diligently making payments toward your student loans for months, so you check your balance to see how much progress you’ve made. But when you log into your account, you’re shocked to see that your balance has gone up. “Why are my student loans not going down?” is a common question. Your student loan balance keeps going up because your payments are probably not covering all of the interest that accrues each month. Although that problem can be frustrating, there are ways to fix it and pay down your balance.
What Impacts My Student Loan Balance?
When you take out a student loan — including federal or private student loans — you agree to repay the amount you borrow along with interest.
Student loan interest rates vary by the type of loan you take out and whether you opt for a fixed-rate or variable-rate loan.
- Federal Loans: For federal loans, rates range from 3.73% to 6.28% in 2022
- Private Loans: Private loans start at 3.20% for fixed-rate loans and 1.20% for variable-rate loans. Your rate may be higher depending on the selected loan term, credit history, and other factors.
Your loan interest rate is calculated as a percentage of your unpaid principal amount. Most student loans are daily interest loans, meaning interest accrues daily. In some cases, the interest that accrues is capitalized and added to the principal amount. Going forward, interest will accrue based on the new, larger principal, increasing your total repayment cost.
Why Does My Student Loan Balance Never Go Down?
If you’ve been making your payments every month and your student loan balance keeps going up, your payment plan is likely to blame. Under a typical repayment plan, you make monthly payments for the duration of your loan term. As long as you make those scheduled payments on time, you should pay off your loans within the selected loan term. For federal student loans, the standard loan term is 10 years. However, many borrowers don’t stick to a standard repayment plan. Instead, they may enroll in an income-driven repayment plan or another alternative repayment plan to reduce their payments. While other repayment plans may lower your payments and make it easier to budget each month, your payment amount may be too low to cover the interest that accrues each month. If your payments don’t cover the new interest charges, your student loan balance will increase. Over time, your loan balance can balloon, and you could end up repaying much more than you initially borrowed.
Why Your Student Loan Balance Keeps Going Up
Consider this example: Nancy earns $30,000 per year from her job, but she has $35,000 in loans at 4% interest and a 10-year repayment term. Under her current plan, her minimum monthly payment is $354, and she’d repay a total of $43,523 by the end of her repayment term. Nancy applied for an alternative repayment plan that extended her payments over 25 years to lower her payments. Her payments started out low — just $113 per month — but increased every two years. In the final year of her loan term, her monthly payments are $343 per month. Despite having lower overall payments, the longer loan term causes more interest to accrue. Under this alternative payment plan, her total repayment cost would be $60,975 — a difference of $17,452. You can use the Education Department’s Loan Simulator tool to see what your monthly payments and total repayment costs would be under different payment plans.
How to Pay Off Your Student Loans
To prevent your loan balance from increasing and pay off your debt, use these three tips:
1. Change Repayment Plans
If you’re on an income-driven repayment plan or another alternative payment option, such as extended or graduated repayment, consider switching to another payment plan. If you change your repayment plan to standard repayment, your monthly payments will likely increase. However, your payments will cover the interest that accrues each month and chip away at the principal, helping to reduce your overall loan cost.
2. Make Extra Payments
If you don’t seem to be making any progress toward your principal, look for extra money in your budget so you can make additional payments. Increasing your payments by as little as $50, $25, or even $10 can make a big difference over time. Use this student loan prepayment calculator to see how making extra payments would affect a borrower with $35,000 in loans at 4% interest and a 10-year repayment term.
| Minimum Payment | Increased Payment By $10 | Increased Payment By $25 | Increased Payment By $50 | |
| Payment Amount | $354 | $364 | $379 | $404 |
| Time in Repayment | 120 months | 117 months | 111 months | 103 months |
| Total Repayment Cost | $42,523 | $42,267 | $41,902 | $41,370 |
3. Consider Refinancing
If you have student loans with relatively high-interest rates, paying down your debt can feel overwhelming because of how much interest accrues. However, there is a solution: if you have good credit and a reliable source of income, you could refinance your debt and potentially qualify for a lower rate. With a better rate, more of your payments will go toward the student loan’s principal instead of interest charges. For example, Nancy decided to refinance her loans and qualified for a 10-year loan at 3.00% interest. Due to her lower rate, she’d save $1,968 in interest charges, and her monthly payments would decrease too.
| Original Loan | Refinanced Loan | |
|---|---|---|
| Repayment Term | 10 Years | 10 Years |
| Interest Rate | 4.00% | 3.00% |
| Monthly Payment | $354.36 | $337.96 |
| Total Repayment Cost | $42,253 | $40,555 |
Use the student loan refinancing calculator to see how much you could potentially save by refinancing your existing loans.
Reducing Student Loan Interest Charges
Have you ever wondered, “Why are my student loans not going down?” The problem is likely your payment amount. Depending on what repayment plan you’re on, your monthly payments may be enough to cover the interest that accrues. You can solve that problem by making extra payments, switching payment plans, or refinancing your debt to get a lower rate. You can use ELFI’s Find My Rate tool to get a quote and check your eligibility without impacting your credit score.
