What if I can’t pay my interest bill?

Interest accrues on unsubsidized loans during a grace period, forbearance, or deferment (where in many cases the government pays this interest on a subsidized loan).  Borrowers are able to request to make payments on this money to avoid it getting added to the principal balance of the loan through capitalization.

The way they do this is through what is called an interest bill.  These can happen simply by requesting them from your servicer or while filling out a form to mark that you wish to pay your interest while on the particular forbearance or deferment.

Your interest will then be billed to you usually quarterly.  Since payments initially are primarily interest, this total can serve as a real shock to borrowers and as a result they often times cannot pay.

What happens in this situation?   It is important to note that while an interest bill will go delinquent there can be no negative credit reporting associated with this since you are not required to make payments on it.  So there are two things you can do.

1)  Make a request to have the interest bill reversed.

2) Nothing.  For once its okay to ignore the problem and it really will go away.  After an interest bill goes delinquent for a set amount of time (typically 30 days), it will convert into what is called an interest notice.  This is a bill that lets you know how much interest you have accrued but does not require payment.  This interest eventually capitalizes.

So when I tell you that you can never ignore you student loans, well like everything in life there is an exception.  But what is not an exception is an interest bill, like most other things with student loans, have options if you can’t pay!