Nelnet is resuming interest charges on student loans, particularly for those on the SAVE plan, because a federal court injunction has blocked the 0% interest feature, effective August 1, 2025. While loans remain in forbearance with no payments due, interest accrues and compounds, causing balances to grow during this legal pause.
Most student loans begin accruing interest as soon as funds are disbursed, even while the student is in school. Subsidized federal loans do not accrue interest during enrollment, but unsubsidized loans do. Interest accrues daily and capitalizes if unpaid after graduation or deferment.
Comments Section Your unsubsidized federal loans and any private loans will accrue interest from when they are taken out. That's normal. You can pay the interest as it accrues, but it's better to just not take as many loans if you have the money to do so. Don't worry about the credit score while in school.
Interest is added from when the first amount is paid to you or your university until the loan is paid off or cancelled. The interest rate is linked to the rate of inflation as measured by the Retail Price Index (RPI). It is set at the start of each academic year based on the RPI from the previous March.
Federal student loans use a method of interest accrual known as "simple interest." Simple interest is calculated only on the principal balance. The principal balance may include previously capitalized interest. With this equation, your current principal balance is multiplied by the interest rate.
If you choose to request a student loan deferment, you won't have to make principal and interest payments during your deferment period.
Teacher Loan Forgiveness
This program forgives up to $17,500 of student loan principal and interest for those who teach full time for five consecutive, complete academic years.
The "7-year rule" for student loans generally refers to when negative marks, like defaults, are removed from your credit report (around 7 years after the first missed payment or default date for federal loans, 7.5 years for private loans), but the debt itself doesn't disappear and must be paid off; it's also a benchmark in bankruptcy proceedings where federal loans can become dischargeable after 7 years from when payments were due, though proving "undue hardship" is required and difficult.
Negotiate With Your Lender
Don't be afraid to have a conversation with your lender. Negotiation can be a powerful tool to secure a lower interest rate on your private student loans. Be polite. Explain your situation, and if you've already made payments on time, highlight your responsible payment history.
Benefits of principal-only payments
Reduced interest costs: By paying down the principal balance, you're reducing the total amount of interest that will be calculated. In the long run, this can save you hundreds (or even thousands) of dollars, depending on your loan terms and interest rate.
Your interest charges will be added to the amount you owe, causing your loan to grow over time. This can occur if you are in a deferment for an unsubsidized loan or if you have an income-based repayment (IBR) plan and your payments are not large enough to cover the monthly accruing interest.
Interest began accruing under this forbearance on Aug. 1, 2025. This forbearance will last until the legal situation changes or servicers are able to send bills to borrowers at the appropriate monthly amount.
The best way to pay off student loans involves a combination of strategies: pay more than the minimum, use the avalanche method (highest interest first) for savings or snowball method (smallest balance first) for motivation, automate payments to save on interest, consider refinancing for lower rates (federal loans lose benefits), and explore federal income-driven plans (IDRs) or Public Service Loan Forgiveness (PSLF) if eligible. Budgeting, increasing income, and tackling extra payments with bonuses or refunds also significantly speed up repayment.
Under the Student Loan Scheme we can borrow money interest-free from the government to help pay for tertiary study, and repay the loan once we finish studying and start earning over a certain amount. If we move overseas after studying, though, we get charged interest on our student loans.
Federal Loans (serviced by Nelnet, MOHELA, etc.): Federal loan servicers like Nelnet and MOHELA do not negotiate settlements because they're not the loan owners. They only manage payments for the U.S. Department of Education.
50% of your budget goes to necessities: rent, utilities, transportation, insurance, groceries, etc. 30% goes to wants: dining out, shopping, gym membership, entertainment, etc. 20% goes towards savings and debt repayment: student loans, auto loans, credit cards, emergency savings, etc.
The loans for your course will be written off when you're 65, or 30 years after the April you were first due to repay – whichever comes first.
During his time in office, President Trump provided temporary COVID-19 relief by pausing federal student loan payments and interest, later extending it, but also signed legislation (the "Big Beautiful Bill") that capped borrowing for grad students, altered repayment options, and made Public Service Loan Forgiveness (PSLF) harder, leading to increased scrutiny and potential garnishments for defaulted loans under his administration's later actions, notes CNN, WPR, NPR, PBS, Yahoo Finance, Student Loan Borrower Assistance, and The New York Times.
If you believe we made an error in reporting your credit to the major consumer reporting agencies, you can submit a dispute. A student loan borrower might file a credit dispute if their credit report shows: Incorrect loan status (e.g., wrongly marked as delinquent or defaulted) Incorrect payment amount or date.
If you continue to be late, we are required to report your loan(s) as delinquent to the nationwide consumer reporting agencies starting at 90 days past due. The longer you go without making payments, the more your delinquency can affect your credit rating.