Tiktker Cha_cha_P from Florida paid $ 7,450 on a student loan with an original balance of $ 8,645. But, with an interest rate of 8%, it now owes $ 8,750.
So, even if he has reimbursed his student loan for years, he still owes $ 100 more than his original balance. “This is why people hate student loans,” he said on Tiktok [1].
Although $ 100 is not a huge sum, consider the calculation of the average borrower of American student loans, who has more than four times the balance.
But it is not only the interest rate which is to be blamed.
About 92% of all student loan debts are federal, issued by the United States Ministry of Education [2]While the remaining 8% is issued by private lenders such as banks.
And almost two thirds (63.2%) of federal student loan borrowers had growing or stagnant sales, according to the latest data from the Federal Reserve.
At the end of the third quarter of 2025, 42.3 million Americans had a federal debt on the student loan with an average balance of approximately $ 39,376 per borrower, according to data from the national data loans system. At the national level, this represents approximately 1.67 billion of dollars.
In 2024, 20% of federal borrowers on student loans were late on their payments and 10.2% of the current sales were suffering from 90 days or more, according to data from the Federal Reserve.
Read more: Rich, young Americans abandon the actions – here are the alternative assets on which they are beating instead
Student loans, like other loans, must be reimbursed with interest – they are not subsidies or scholarships. Interest in government student loans are fixed and interest rates for leaving leaving before July 1, 2026, by federal aid to students, vary from 6.39% to 8.94% depending on the type of loan.
Private student loan rates are often even higher and can be fixed or variable. When you ask for a private loan, you must generally accept a credit verification. And, as many new students have no credit history, they will often need a co -signer like their parents.
The loan must be reimbursed over a predefined period, such as five or 10 years, but you may have options to postpone payments, make partial payments or pay interest only while you are at school. Private lenders can lend an amount up to 100% of the cost of attendance.
On the other hand, federal student loans do not require credit or co -signer verification, unless you contract a parent loan for undergraduate students (more). But they have annual and life limits and, like most private lenders, they charge creation costs.
You can postpone payments on a student loan until you get your diploma or fall below half-time. At this point, you can choose from one of the seven reimbursement programs, including four which are linked to your income.
The standard reimbursement plan is a period of 10 years with a fixed amount; There is a graduated and extended version of this plan.
The four reimbursement plans (IDR) income are based on the amount of money you earn, as well as the size of your family. They demand that you pay between 10% and 20% of your income, depending on the plan.
Once you have paid a certain number of months on an IDR plan or work in certain public service jobs, your remaining loan balance can be forgiven.
Under the modifications brought by the Trump administration, however, these IDR plans will be deleted by 2028 and replaced by a new program which, according to some criticisms [3].
One of the reasons why people do not progress in the reimbursement of their student loan – despite payment with diligence each month – is that the payments under an IDR are not always important enough to reimburse all the interest due. So you don’t even touch the director.
To worsen things, there are cases where the unpaid interest accumulated on the loan capitalize. This means that any interest is added to the loan director, then interest is billed on this new amount in the future. This can lead to a new main amount which is greater than the original amount.
The capitalization of the interests of student loans is triggered by various events depending on the type of loan that you hold. For example, interests capitalize if you are on an IDR plan and are no longer eligible for IDR Plan or on direct non -subsidized loans after a postponement.
To avoid this situation, it is preferable to pay enough to cover all the interest due and preferably some of the main ones each month. This may require some lifestyle adjustments, but it is probably worth the long -term trouble.
If you are a student, try to borrow as little as possible. Take the time to ask for scholarships and subsidies, choose a school that you can afford and try to live at home if you can.
You can also work in high school and university to cover some of your expenses, but you will have to find a schedule that allows you to maintain your grades.
Although this can mean short -term pain, this could lead to a long -term gain – so you can potentially avoid crushing you later in life debt.
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[1]. Tiktok.
[2]. Education data institute. “Student loan debt statistics”
[3]. Newsweek. “Student loan update: Warning issued on the new Trump plan”
This article only provides information and should not be interpreted as advice. It is provided without guarantee of any kind.
