Information About 1098-E

Learn more in the IRS Pub. 970, Tax Benefits for Education

IRS Publication 970 2013

Learn More About Student Loan Interest

See how capitalization can affect the amount you owe.

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How to Calculate Your Interest

Interest accrues on your principal balance (which includes the disbursement check amount plus any applicable loan fees) as soon as the loan is disbursed for Direct Unsubsidized, FFELP Unsubsidized, Direct and FFELP PLUS Loans, and Private Loans.

Generally, interest on Direct Subsidized and FFELP Subsidized Loans begins to accrue after your six-month grace period.


Simple Daily Interest Calculation

The amount of interest that accrues on your loan is determined by a simple daily interest calculation:

   Your current principal balance

×  The number of days since your last payment

×  Interest rate factor = interest rate ÷ 365.25 (number of days in a year)

=  Your daily interest rate

If you have multiple student loans, you likely have multiple interest rates, so you will need to do this calculation for each loan, and add them up to see all the daily interest.

Once interest is capitalized, it becomes part of the principal balance and interest begins to accrue on the new principal amount.

At the end of each year you should receive a tax document from Navient and each of your loan servicers detailing the exact amount of interest that you paid.

The good news is that the IRS treats capitalized interest as interest for tax purposes and is deductible as payments of the principal balance are made on the loan. However, no deduction for capitalized interest is allowed in a year in which no loan payments were made.

Learn more about your 1098-E tax statement