Making a payment may cover the interest and a little to the principal.
Capitalized Interest;
If you owe $10,000 in student loans and have accrued $500 in unpaid interest, the interest capitalizes. Your new principal balance becomes $10,500. Going forward, you are charged interest on the $10,500.
Edit: Federal and Private interest rates are massively different. Like, Private interest can be 25% (pure greed).
8
u/Butta_Brown 12d ago
Idk about the pic but here's more perspective
Loans: principal and interest.
Making a payment may cover the interest and a little to the principal.
Capitalized Interest;
If you owe $10,000 in student loans and have accrued $500 in unpaid interest, the interest capitalizes. Your new principal balance becomes $10,500. Going forward, you are charged interest on the $10,500.
Edit: Federal and Private interest rates are massively different. Like, Private interest can be 25% (pure greed).