Last Updated: April 30, 2022
We’re required to apply all payments to your loan in the following order:
1. Reduce any unpaid fees and charges
2. Reduce any accrued interest
3. Reduce the principal balance
Once the fees, charges, and interest have been satisfied, the remaining amount applies to your principal balance.
Let’s look at an example:
Jane makes a $100 payment to her student loan. Jane has a $5 late fee from last month and $30 in accrued interest on her account, so the first $35 will cover the fee and the interest charges. The remaining $65 will be applied to the principal.