When Does Student Loan Interest Start?

You may be wondering when student loan interest starts accruing. Well, the answer may depend on the type of loan you have.

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With student loan interest, it’s important to know when it starts. Depending on the type of loan, the grace period, and other factors, interest can start accruing immediately, or it may not start until after you graduate.

Types of Student Loans

Federal student loans and private student loans each have different interest rates.

Federal student loan interest rates are determined by Congress and usually change every year on July 1. For the 2019-2020 school year, the interest rate on Direct Subsidized Loans for undergraduate students is 4.53%. The interest rate on Direct Unsubsidized Loans for undergraduate and graduate students is 6.08%.

The average private student loan has an interest rate of 10.37%, according to Education Finance Partners. But that number doesn’t paint the whole picture because lenders set their own rates. To get an accurate idea of what you might pay in interest, compare offers from multiple lenders.

Federal Student Loans

For federal student loans, interest begins to accrue as soon as your loan is dispersed. You’ll receive your first bill after a six-month grace period, and at that point, you’ll be responsible for repaying the accrued interest as well as the principal amount of your loan. If you choose not to pay the accrued interest while you’re in school or during your grace period, it will be added to your principal balance, and you’ll end up paying interest on that larger balance for the life of your loan.

Private Student Loans

If you have a private student loan, interest starts accruing as soon as the loan is disbursed. (This is the case for both variable and fixed-rate loans.) Some private lenders may give you a grace period of six months before interest starts to accrue, but it’s not required.

Interest Rates

The interest rate on your student loans can have a big impact on your overall repayment costs.

Federal student loan rates are set by Congress and generally go into effect on July 1 of each year. For loans first disbursed on or after July 1, 2017, undergraduate rates range from 4.45% to 7.00%. Graduate rates for Direct PLUS Loans first disbursed on or after July 1, 2017 are 7.00%.

The interest rate for private student loans varies depending on the lender, your creditworthiness, and other factors.

Interest accrues (accumulates) on a federal student loan from the time the loan is first disbursed until it is paid in full. If you choose not to pay the interest as it accrues, it will be capitalized (added to your principal balance), and the total amount you have to repay will be higher.

When Does Student Loan Interest Start?

The answer to this question depends on the type of loan that you have. For federal loans, the interest starts accruing (accumulating) as soon as the loan is disbursed (paid out). This means that if you take out a loan for the fall semester, the interest will start accruing immediately. However, if you wait until after you graduate to start repayment, the interest that has accrued during your grace period will be added to your principal balance (capitalization). For private loans, the interest may start accruing immediately or may be deferred until after you graduate. It is important to check with your lender to find out when your interest will start accruing.


In conclusion, student loan interest typically starts accruing once you begin repayment or when you enter forbearance or deferment. The sooner you start paying off your loans, the less interest you will accrue. You can make voluntary payments on your loans while in school or during a grace period to reduce the amount of interest that accrues.

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