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. 

Read the source article at The Hill

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