How Student Loan Interest Works

It's important to understand how your interest is calculated and any fees associated with your loan. The longer you take to pay off your loan, the more interest will accrue, increasing the amount you will be required to repay. These details are generally found in the promissory note and disclosures you received when you took out your student loan.

Ways to Lower Your Interest Rate

When you enroll in Auto Pay from your bank account – and if your payments stay current – you can receive a .25% interest rate discount.

Log in to enroll in Auto Pay

Capitalized Interest

Capitalized interest is accrued interest that has been added to your Unpaid Principal. Capitalization may occur at the end of periods of deferment or forbearance, as permitted by law and your loan agreement. Since the interest that is capitalized gets added to the principal, the customer will accrue interest on a higher balance.

Simply put, there will be interest to be paid on both the principal of the loan and on the interest that has already accumulated.

How to Calculate Your Interest

Interest accrues on your principal balance as soon as the NaviRefi loan is disbursed.

Simple Daily Interest Calculation

The amount of interest that accrues on your loan is determined by a simple daily interest calculation:

Your current principal balance

×  The number of days since your last payment

×  Interest rate factor = interest rate ÷ 365 or 366 (number of days in the year)

=  Your daily interest rate

If you have multiple student loans, you likely have multiple interest rates, so you will need to do this calculation for each loan, and add them up to see all the daily interest.

Once interest is capitalized, it becomes part of the principal balance and interest begins to accrue on the new principal amount.

At the end of each year you should receive a tax document from Navient and each of your loan servicers detailing the exact amount of interest that you paid.

The good news is that the IRS treats capitalized interest as interest for tax purposes and may be deductible as payments of the principal balance are made on the loan. However, no deduction for capitalized interest is allowed in a year in which no loan payments were made. We are not able to provide you with tax advice. Please consult your tax advisor if you have questions.