Student loan help

[pjoseph]

While doing my taxes I noticed a high interest rate on my student loan.

 

my interest for 2008 was $3,181.99

The loan is for $24,900

This is about 13% when I divide it out.

 

The other weird thing is my payments are only $256 a month which does not even cover the interest

 

The lender is Key Education Resources

 

I am just starting to do some research before i call them and figure out what is going on I figured it wont hurt to get some input.

I also went on line to check the interest rate and it listed 4.5% so not sure what is going on here.

 

Any ideas?

 

Thanks

[LynnInMN]

While doing my taxes I noticed a high interest rate on my student loan.

 

my interest for 2008 was $3,181.99

The loan is for $24,900

 

Is this the balance now?? Or when you started?

 

This is about 13% when I divide it out.

 

The other weird thing is my payments are only $256 a month which does not even cover the interest

 

The lender is Key Education Resources

 

I am just starting to do some research before i call them and figure out what is going on I figured it wont hurt to get some input.

I also went on line to check the interest rate and it listed 4.5% so not sure what is going on here.

 

Any ideas?

 

Thanks

 

Did you talk to someone at Key??

[Saria]

Did you graduate, otherwise come out of deferment, or consolidate last year? Sounds like capitalized interest to me.

[pjoseph]

I graduated about a 1.5 years ago and started paying the loan after the 6 month grace period. I have made all my payments for about a year now.

 

I have not consolidated anything I left the loan as is.

 

I have not talked to anyone at Key yet since i want to do some research before I call.

[Saria]

I think what you're seeing is the interest that was capitalized when your in-school deferment + grace period ended last year. Definitely call the lender to make sure there isn't anything funny going on, but I'd bet that's what it is.

[pjoseph]

I will be calling tomorrow during my lunch break.

So this will be the only year that the interest amount should be this high?

 

Thanks again for you help I will follow up tomorrow once I talk to the lender

[pjoseph]

i just spoke to someone there and they said that was an accumulation of interest from the time I was in School plus the 6 month grace period.

I looked online and the loan is unsubsidized so i guess it makes sense. I could be wrong because this is all new to me.

 

Does this sound correct?

 

thanks again

[pjoseph]

can anyone confirm that this sounds correct?

 

thanks

[Saria]

Yes, that sounds right. With unsubsidized loans, interest accrues even during the in-school deferment period and the grace period. When you entered repayment, that interest was capitalized. That is, it's now part of your principal and you'll be charged interest on that amount in addition to the original amount borrowed. For tax purposes, you "paid" the interest when it was capitalized, even though you didn't really pay it.

[pjoseph]

Thanks for your help

[john auckland]

the best of luck with your loan situation!