​What increases your total student loan balance in 2025? Here’s why your debt can grow 

10/02/2025
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08:37
CSTMany borrowers assume that once they take out a student loan, their balance will only decrease as they make payments. However, several factors can cause a student loan balance to increase over time, making repayment more difficult. As student loan policies evolve in 2025, borrowers must understand the common reasons why their debt can grow even after making regular payments.One of the biggest reasons student loan balances increase is interest accrual. Federal and private student loans charge interest daily or monthly, depending on the loan terms. For borrowers who are in deferment, forbearance, or on certain repayment plans, unpaid interest can capitalize-meaning it is added to the principal balance, leading to interest on top of interest.For example, if you have a $30,000 loan with an interest rate of 6%, and you pause payments for a year, the unpaid interest may capitalize, adding hundreds or even thousands of dollars to your loan balance.Recent federal student loan policies have aimed to curb interest capitalization in specific situations. However, interest continues to accumulate during deferment, grace periods, and income-driven repayment plans, unless the government is covering the interest for subsidized loans.Pausing payments through forbearance or deferment can significantly increase student loan balances. While deferment may allow subsidized loans to remain interest-free, unsubsidized loans and private loans continue accruing interest, which adds to the total balance.Forbearance, often used in financial hardship situations, does not stop interest from accumulating. Many borrowers who opt for forbearance periods lasting months or years find that their loan balance has grown despite making little to no progress in repayment.Income-driven repayment plans (IDR), such as SAVE, PAYE, REPAYE, and IBR, allow borrowers to make monthly payments based on their income. While these plans can make repayment more affordable, they may not cover all the monthly interest, leading to negative amortization, where the total debt continues to grow instead of decrease.For instance, a borrower with a $50,000 loan and an income-based payment of $50 per month may not even cover the monthly interest charge. Over time, their loan balance increases rather than decreases, despite making consistent payments.In 2025, the new SAVE plan offers interest subsidies, preventing some loans from growing in balance. However, borrowers on older IDR plans or private loans may still face growing debt due to low monthly payments.Failing to make full on-time payments can also result in a larger balance. Late fees, capitalized interest, and continued accrual of unpaid amounts can quickly add to the total student loan debt. Borrowers who miss payments for several months may experience their loan balance ballooning, making it even harder to regain control.