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Be wary of student loan interest

Be wary of student loan interest

Be wary of student loan interest

Millions of students every year attend college with the help of private or public student loans. While you can certainly use student loans to your advantage, it’s important to know how interest rates can affect you and your payments.

Millions of students every year attend college with the help of private or public student loans. While you can certainly use student loans to your advantage, it’s important to know how interest rates can affect you and your payments.

Millions of students every year attend college with the help of private or public student loans. While you can certainly use student loans to your advantage, it’s important to know how interest rates can affect you and your payments.

Apr 6, 2023

Sam Lipscomb

3

min

Student loans are a powerful tool. They can help you afford college, but if you’re not careful about how much you take out and what your plan is to repay them, it’s easy to end up in a tough spot due to the interest you have to pay on your student loan debt.

Student loan interest should be a major concern for any student that takes out student loans. The more you take out to help cover tuition and other expenses, the more you’re going to have to repay once you graduate and start working. It’s important to understand how student loan interest works so that you can effectively manage your loan payments and make sure you don’t end up paying too much over the life of the loan.

What is student loan interest?

Student loans aren’t free. In exchange for getting money upfront for tuition and living expenses, you’ll have to pay your private or public a certain percentage of your total loan every year. For public loans, interest rates tend to be lower and are fixed. Private loans often carry higher rates that may depend on things like your credit score (which is why Fizz can help you pay less on your student loans).

It’s important to understand how interest is applied to your loan. Some loans are interest-only, meaning that you only pay interest payments on what you originally borrowed. Other student loans operate with a compound interest model. This means that your interest is calculated based on what you borrowed originally and the interest you’ve already accrued. This can significantly increase the total amount of money you end up paying over the life of the loan, as the amount of money that accrues interest is constantly growing. Luckily, most student loans are interest-only, but it’s important to be sure when taking out your loans.

When do you have to start paying interest on your student loans?

There are three main types of student loans: subsidized Federal direct student loans, unsubsidized Federal direct student loans, and private student loans.

With subsidized Federal direct student loans, the government will cover your interest payments while you’re still school, during the grace period, or if your payments have been paused because of unemployment or part-time enrollment in school. In short, you won’t owe interest while you’re in school, and you likely won’t owe interest until you get a job.

When it comes to unsubsidized Federal direct student loans, you’ll own interest right away - this makes subsidized loans a much better choice. With private student loans, your experience may vary depending on the terms of your loan. However, most private loans require that you begin payment immediately.

What do I need to be wary of?

Interest rates and interest payments are the price of taking out any kind of loan. But it’s important to know your options so that you don’t get stuck paying too much. Subsidized Federal direct student loans are typically the best option because they’re interest-only and you won’t need to start making payments until after college.

You should be wary of the other types of student loans, especially those that compound interest. Much like with credit card debt, compounding interest can leave you paying thousands upon thousands of extra dollars, even if you regularly make payments.

You should also be wary of loans that require you to start making interest payment immediately. If you start missing payments, you’ll be subject to additional fees and potentially hikes in the interest rate - which will increase your future monthly payments. Missing several payments can lead to default, which can negatively impact your credit score and make it harder for you to refinance or get approved for other types of loans (like a mortgage, an auto loan, or even an apartment) later on.

There’s one more thing to know about when it comes to student loan interest. Lots of student are eligible to qualify for loan forgiveness or deferment programs that can help reduce your student loan interest. These programs can be incredibly helpful, so be sure to research them and see if you qualify.

The bottom line

By fully understanding how student loan interest works, you can make sure you’re not paying more than you need to. You’ll also be in a far better position to manage your loan payments and personal finances responsibly.

Fizz is here to help as well. No matter what kind of student loans you have, Fizz can help you get a better handle on your spending and your personal finances. Plus, we’re constantly publishing resources that are designed to help answer all the questions you might have as a young adult. No more getting stuck with Google answers that don’t make any sense. We’re excited to help set you up for your financial future. Don’t wait any longer! Sign up today to get your very own Fizz card!

*This communication is for informational purposes only and should not be considered financial advice.*

Sam Lipscomb

Author bio

Sam is a Kenyon College alum and is head of content at Fizz. He's been a go to personal finance resource among his peers since getting his first credit card during his sophomore year of college. He hails from Washington, DC, loves all things aviation, and currently lives in Los Angeles.

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ShoulderTap Technologies, Inc. d/b/a Fizz © 2024.


40 Wooster Street, Level 2, New York, NY 10013. All rights reserved. FIZZ® is registered in the U.S. Patent and Trademark Office.

ShoulderTap Technologies, Inc. d/b/a Fizz © 2024. 40 Wooster Street, Level 2, New York, NY 10013. All rights reserved. FIZZ® is registered in the U.S. Patent and Trademark Office.


ShoulderTap Technologies, Inc. d/b/a Fizz (“Fizz”) is not a bank. The Fizz Debit Mastercard® (“Fizz Card”) is issued by Patriot Bank, N.A., Member FDIC, pursuant to a license from Mastercard® and may be used everywhere Mastercard® debit cards are accepted. Any loans you may be offered in connection with your use of the Fizz Card are originated by Lead Bank, a Missouri state-chartered bank. Any promotions or rewards you may be offered in connection with your use of the Fizz Card are offered and managed by Fizz, not our bank partners.


Fizz Members may choose to apply for a Fizz Card, but are not required to. Fizz Membership does not guarantee access to a Fizz Card. Application and eligibility restrictions apply. Over $300 in annual value of Fizz Card based on cash value available to Fizz Card users assuming half of all available rewards and promotions are used. Actual results may vary.


Fizz cardholders: Fizz reports your payment history on the revolving, open-end line of credit accessed by your Fizz Card. Increases or specific changes to your credit score are not guaranteed. Impact on your credit score may vary depending on your use. Fizz is required to report late payments, which may negatively impact your credit score. Credit scores are independently determined by credit bureaus based on a number of factors, including your activity with other creditors. The Fizz Card and related services will not remove negative credit history from your credit report. Fizz, on behalf of Lead Bank, will report your activities to Experian®  and Transunion® .
For additional information, terms and conditions applicable to your use of Fizz’s services, please consult Fizz’s Terms of Use and Privacy Policy, the Cardholder Agreement, any Line of Credit Agreement in effect between you and Lead Bank and any and all other applicable terms, policies and guidelines made available to you through the Fizz services.


Selected customers reviews above describe individual experiences or results. Individuals in TikTok videos featured above are paid spokespeople. Selected customer reviews above describe individual experiences or results. Actual results may vary. App Store rating as of September 2024.


Credit score sliding scale feature is for informational purposes only. Credit score ranges based on information available on RentSpree. Car loan figures assume a loan value of $30,000 over 72 months and based on information available on CNN. Student loan figures assumes a $35,000 private student loan with a 10-year term and based on information available on CNBC, NerdWallet and Credible. Apartment approval based on information available on BI and RentSpree.


For people with disabilities, including those who are visually impaired, deaf, or hard of hearing, we accept messages via our in-app chat, emails at [email protected], and calls on our answering machine at (940) 260-2704. If you leave us a voicemail, please leave your name and number and a member of our customer support team will return your call.

ShoulderTap Technologies, Inc. d/b/a Fizz © 2024.


40 Wooster Street, Level 2, New York, NY 10013. All rights reserved. FIZZ® is registered in the U.S. Patent and Trademark Office.

ShoulderTap Technologies, Inc. d/b/a Fizz © 2024. 40 Wooster Street, Level 2, New York, NY 10013. All rights reserved. FIZZ® is registered in the U.S. Patent and Trademark Office.


ShoulderTap Technologies, Inc. d/b/a Fizz (“Fizz”) is not a bank. The Fizz Debit Mastercard® (“Fizz Card”) is issued by Patriot Bank, N.A., Member FDIC, pursuant to a license from Mastercard® and may be used everywhere Mastercard® debit cards are accepted. Any loans you may be offered in connection with your use of the Fizz Card are originated by Lead Bank, a Missouri state-chartered bank. Any promotions or rewards you may be offered in connection with your use of the Fizz Card are offered and managed by Fizz, not our bank partners.


Fizz Members may choose to apply for a Fizz Card, but are not required to. Fizz Membership does not guarantee access to a Fizz Card. Application and eligibility restrictions apply. Over $300 in annual value of Fizz Card based on cash value available to Fizz Card users assuming half of all available rewards and promotions are used. Actual results may vary.


Fizz cardholders: Fizz reports your payment history on the revolving, open-end line of credit accessed by your Fizz Card. Increases or specific changes to your credit score are not guaranteed. Impact on your credit score may vary depending on your use. Fizz is required to report late payments, which may negatively impact your credit score. Credit scores are independently determined by credit bureaus based on a number of factors, including your activity with other creditors. The Fizz Card and related services will not remove negative credit history from your credit report. Fizz, on behalf of Lead Bank, will report your activities to Experian®  and Transunion® .
For additional information, terms and conditions applicable to your use of Fizz’s services, please consult Fizz’s Terms of Use and Privacy Policy, the Cardholder Agreement, any Line of Credit Agreement in effect between you and Lead Bank and any and all other applicable terms, policies and guidelines made available to you through the Fizz services.


Selected customers reviews above describe individual experiences or results. Individuals in TikTok videos featured above are paid spokespeople. Selected customer reviews above describe individual experiences or results. Actual results may vary. App Store rating as of September 2024.


Credit score sliding scale feature is for informational purposes only. Credit score ranges based on information available on RentSpree. Car loan figures assume a loan value of $30,000 over 72 months and based on information available on CNN. Student loan figures assumes a $35,000 private student loan with a 10-year term and based on information available on CNBC, NerdWallet and Credible. Apartment approval based on information available on BI and RentSpree.


For people with disabilities, including those who are visually impaired, deaf, or hard of hearing, we accept messages via our in-app chat, emails at [email protected], and calls on our answering machine at (940) 260-2704. If you leave us a voicemail, please leave your name and number and a member of our customer support team will return your call.