Home |Student Loan | Does excess interest above your monthly payment on the SAVE plan accrue, and will it be added to your principal if you come off SAVE? Also, if you make an extra payment after this interest is "forgiven" each month, does it go towards your principal or just next month's interest?

Does excess interest above your monthly payment on the SAVE plan accrue, and will it be added to your principal if you come off SAVE? Also, if you make an extra payment after this interest is "forgiven" each month, does it go towards your principal or just next month's interest?

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Abbey Johnson, Helping with Student Loan Documentation
Answered on October 02,2023

Capitalization is when interest is added to principal. Interest then accrues on the new total. Interest only capitalizes under certain conditions so if you have interest accruing that is unpaid, it continues to be interest. (You owe 40k and accrue 100 a month in interest. After 3 months of not paying, you owed 40k in principal and $300 in interest.) The thread above offers an explanation on how SAVE works.

Check this SAVE Plan Guide.

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Guide

Ultimate Guide on SAVE Plan - Payment Calculation, Interest, Forgiveness

Under the Saving on a Valuable Education (SAVE) plan, a single borrower who makes less than $15 an hour will not have to make any payments. Borrowers earning above that amount would save mor..
  Click here to get a detailed guide

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