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Author Topic: Question about the Federal Student Loan Interest Subsidy  (Read 487 times)

PrivateCollegeGrad

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Question about the Federal Student Loan Interest Subsidy
« on: January 27, 2019, 02:58:04 PM »
Hello,

These forums are a great resource - thanks for hosting!

I have a question about whether I should have received a federal student loan interest subsidy.

After graduating undergrad in 2010, I consolidated my federal loans in 3/2011. I currently hold a direct subsidized consolidation loan and a direct unsubsidized federal consolidation loan.

After making income-based payments in July and August 2012 I entered grad school, at which time my loans were put into deferment. After completing grad school, I made another income-based payment in 6/2014 - and then my interest capitalized in 7/2014, adding a total of $4,315.66 to my loan balance.

I continued making monthly income-based payments through 2014 and 2015. My interest capitalized again on 03/24/2016 (increasing my balance by $583.47), and on 7/1/2016 (increasing my balance by $745.63).

My understanding is that the Federal interest subsidy should have helped keep my balance from increasing because my monthly payments weren't enough to pay off the accrued interest each month. I've read (link below) that the government will pay your interest fees for three years, if when on an income-based plan your minimum payments don't cover all the interest that accumulates on your subsidized loans.

In my case, is it possible that FedLoan made an error, and this is why my balance went up? If so, how do I address this with them and get it corrected? They've truly been a nightmare to work with over the years and I want to make sure there is a real issue here before I try to take it up with them.

I've continued making on-time monthly income-based monthly payments since since completing grad school but my loan balance is still higher than my original loan amount.

Articles I referenced:

https://studentloanhero.com/featured/interest-subsidy-federal-loans/

https://www.cometfi.com/blog/what-is-the-federal-student-loan-interest-subsidy

Thanks for your help!


TheCollegeInvestor

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Re: Question about the Federal Student Loan Interest Subsidy
« Reply #1 on: January 27, 2019, 04:43:02 PM »
Each loan is treated differently.

Your subsidized loan includes an interest subsidy, which would cover you during your in-school deferment. Interest would accrue other times, especially if you weren't making payments.

The unsubsidized loan was always accruing interest.