Most people who have student loans end up paying way more than the original balance. In fact, studies have shown that only 25 percent of student loan borrowers are paying the principal balance. The principal is the amount that one originally took out. Betsy Devos, who is the education secretary, talked about this at a recent conference.
Here is an example of how much your student loan balance can increase. Rick Tallini attended law school in the 1990s. He initially had trouble paying his student loans because he could not find a job. Today, his student loan balance is $300,000.
Persis Yu is the director of the Student Loan Borrower Assistance Project at the National Consumer Law Center. He stated that it is not uncommon for your loan balance to double, triple and even quadruple. The interest rate is one of the main reasons that student loan balances increase drastically.
Your loans will accumulate interest while you are in school. They will also accumulate interest during the six-month grace period. This is how you may end up owing $56,000 even if you only took out $50,000.
You can reduce your interest by making payments while you are in school and during the grace period. Keep in mind that you only have to pay interest on your private loans. The government pays interest on unsubsidized loans.
If you are having trouble paying your loans because you cannot find a job, then it is good idea to request an economic hardship program. This will temporarily suspend your payments. However, interest will still be added to the loan.
Keep in mind that temporary suspending your payments is a lot better than letting them default. Not paying your student loans will cause your balance to increase drastically. It will also ruin your credit score.