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I’ve Paid More than I Originally Borrowed: Why Do I Still Have a Balance?

Lenders often charge borrowers far more than what they originally borrowed because of interest and fees, but sometimes extra costs are avoidable.

Written By: Michael P. Lux, Esq.


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Nothing is more frustrating than realizing you have already repaid more than your original student loan balance.

It seems unfair.

Government student loans are supposed to help you pay for college, not be a source of profit for the government.

I often get emails from readers who find themselves in this exact situation. They usually have one of two questions: How did this happen? Is there anything I can do to be done?

Why do I still have a balance? Is this fraud?

If you are wondering why you still have a balance after years of repayment and paying more than what you first borrowed, the answer usually goes back to two items: interest and fees.

Other than subsidized federal loans, interest accrues daily from the day you receive the loan. This is somewhat misleading to many borrowers because that interest doesn’t immediately get added to your balance. As a result, many people mistakenly think that their balance isn’t growing during school. When an event triggers interest capitalization, that interest gets added to your balance.

Additionally, fees can cause a balance to grow. For some borrowers, falling behind on payments can result in massive fees and a swelling loan balance. However, even if you never miss a payment, there are still fees with federal loans. Loan origination fees are added to every federal balance from day one.

Because of the fees and interest with federal student loans, borrowers who repay their loan in full will have to pay much more than they originally borrowed.

Settlement Options

Many borrowers would like a break on their remaining payments. I often get questions from readers about settling the remaining debt as borrowers feel they have paid their fair share.

Unfortunately, settling any federal student debt is extremely difficult.

When you have repaid more than your original balance, it usually means you have been in repayment for many years. Borrowers in this situation have shown an ability to make monthly payments. From the lender’s perspective, this borrower is likely to repay their remaining obligation. They don’t have any incentive to help the borrower.

The borrower is legally obligated to repay the debt in full plus interest, and borrowers in repayment have shown an ability to make monthly payments. When this happens, settlement is next to impossible.

Relief for borrowers stretched thin

Looking back at your prior spending on student loans won’t do you any good. It will only cause frustration. Instead, focus on the future. Try to find the path forward that saves the most money.

For some borrowers, this means pursuing one of the many routes to student loan forgiveness.

Other borrowers may want to adopt an aggressive repayment strategy. The sooner you pay off your debt, the sooner you stop spending money on interest.

A Fair Policy

If you think that the current rules are unfair, you are not alone.

Many borrowers end up paying more than double their original balance.

This site has previously called for permanently setting interest rates at 0% and forgiving the remaining balance for borrowers who have paid more than they originally borrowed.

Attending college makes people less likely to rely on government safety net programs and increases the amount they pay in taxes due to higher earnings. Spending money so that people can attend college is an excellent investment for the government. Asking to profit off that lending is asking too much.

If you support these policies, reach out to your elected representatives to let them know your thoughts. The right phone call or email can make a huge difference.

About the Author

Student loan expert Michael Lux is a licensed attorney and the founder of The Student Loan Sherpa. He has helped borrowers navigate life with student debt since 2013.

Insight from Michael has been featured in US News & World Report, Forbes, The Wall Street Journal, and numerous other online and print publications.

Michael is available for speaking engagements and to respond to press inquiries.

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