Author Topic: Why is my principal increasing on my student loans...  (Read 3966 times)

FuckRx

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Why is my principal increasing on my student loans...
« on: February 24, 2014, 09:24:27 AM »

I used to pay a little extra every month for my student loans, but with my interest rates at 2.75% I decided to just pay the minimum payment. I owe about 110,000 still. I was looking over my principal and see that every few days the value is going up... for example one week I owed 110,083 and then the next week it was up at 110,107 and so on.
So I contacted the loan company and this is what they sent me and I don't quite understand it. They say I have 292 payments left and by payments right now are 604/mo.
I've attached their email to me when I asked them to explain it.

randymarsh

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Re: Why is my principal increasing on my student loans...
« Reply #1 on: February 24, 2014, 09:41:33 AM »
Are you sure you're looking at "Total principal" and not "Total balance"? My breakdown looks like this:



Your loan is costing you ~$8.28 per day in interest. So if you looked at your total loan balance 3 days after it was $110,083 it would show $110,107. After a payment posts and satisfies all accrued interest (and reduces some principal), your total loan balance will increase each day until another payment is made which satisfies that accrued interest. Over time, more and more of your payment will go towards principal and not accrued interest. Similar to a mortgage.

Every regular loan payment you make should reduce your principal balance unless you're on an income based repayment plan where your payments don't cover all the interest that accrues.
« Last Edit: February 24, 2014, 09:44:08 AM by thefinancialstudent »

FuckRx

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Re: Why is my principal increasing on my student loans...
« Reply #2 on: February 24, 2014, 09:51:35 AM »
that makes sense. I just switched to this minimum payment plan so that is why I haven't seen a payment post yet.
but $8/day of interest... ouch. that's a lot.