Political and Legislative
The Education Department Proposes a New Rule That Could Transform Student Loan Interest
A new rule proposed by the Education Department could transform the way student loan interest is capitalized, possibly saving borrowers thousands.
Interest capitalization is a lesser-known student loan mechanism that occurs when a loan, while in a grace period such as deferment or an income-driven repayment plan, continues to accrue interest that’s then added to the principal balance.
This results in the loan’s interest rate being applied to an ever-growing principal balance, something the department wants to change.
