You have a “simple interest” loan. This means that interest is assessed every day. To calculate how much interest is assessed each day, you can multiply your principal balance by your loan’s interest rate and then divide by 366 (because it is a leap year). To see how much interest built up while your payment was deferred, multiply that daily interest amount by the number of calendar days since your last payment.

Even though no payments are required during a deferment period, interest continues to build up during this time. When your deferment period ends and you resume monthly payments, your payments will first be allocated to offset your total interest that has accumulated during the deferment period. Once the interest is paid, the remaining payment will be applied to principal.

By paying a little extra when you can – during or after your COVID deferment – you will reduce the amount of the final payment, while simultaneously lowering the amount of interest you owe. Consider rounding up your payment each month or dedicating a portion of a bonus or tax refund to reduce your balance.

If you borrowed $20,000 at an 11% interest rate for 5 years, your monthly payment would be $434.85 for 60 months. If you needed to take a 3-month COVID-related deferment, starting in the 11th month of your loan, this is what you could expect:

• Your monthly payment amount after deferment would remain $434.85.
• Your final payment date would be pushed out by 3 months beyond the original date.
• Your first monthly payment after deferment would go towards paying off the interest that accumulated while your loan was deferred. There is no reduction to your principal during this time.
• After you make all of your remaining payments within your term, assuming you pay $434.85 on your due date, you would owe a final payment of about $1,180 (about $745 higher than usual).
• The following factors influence the size of the final payment:
  • The length of your deferment
  • How far into your loan you were when your deferment started (the earlier in your loan, the higher the final payment as a result of the fact you pay more in interest upfront versus towards the end of your loan term)
  • Your interest rate
  • Your loan balance at the start of your deferment
  • The timing of your payments (paying before your monthly due date reduces the amount; paying after your monthly due date increases it)
  • The amount you decide to pay each month (paying a little extra when you can will reduce the amount of the final payment, although you are not required to do this)
• Remember, you can prepay your account at any time without penalty.

Using the above example, here is what you could expect if you took two 3-month extensions:

• Your monthly payment amount after deferment would remain $434.85.
• Your final payment date would be pushed out by 6 months beyond the original date.
• Your first three monthly payments after deferment would go towards paying off the interest that accumulated while your loan was deferred. There is no reduction to your principal during this time.
• After you make all of your remaining payments within your term, assuming you pay $434.85 on your due date, you would owe a final payment of about $1,910 (about $1,475 higher than usual).

If you borrowed $33,000 at a 6.7% interest rate for 6 years, your monthly payment would be $557.88 for 72 months. If you needed to take a 3-month COVID-related deferment, starting in the 26th month of your loan, this is what you could expect:

• Your monthly payment amount after deferment would remain $557.88.
• Your final payment date would be pushed out by 3 months beyond the original date.
• Nearly all of your first monthly payment after deferment would go towards paying off the interest that accumulated while your loan was deferred. There is very little reduction to your principal balance in this month.
• After you make all of your remaining payments within your term, assuming you pay $557.88 on your due date, you would owe a final payment of about $1,055 (about $500 higher than usual).
• The following factors influence the size of the final payment:
  • The length of your deferment
  • How far into your loan you were when your deferment started (the earlier in your loan, the higher the final payment as a result of the fact you pay more in interest upfront versus towards the end of your loan term)
  • Your interest rate
  • Your loan balance at the start of your deferment
  • The timing of your payments (paying before your monthly due date reduces the amount; paying after your monthly due date increases it)
  • The amount you decide to pay each month (paying a little extra when you can will reduce the amount of the final payment, although you are not required to do this)
• Remember, you can prepay your account at any time without penalty.

Using the above example, here is what you could expect if you took two 3-month extensions:

• Your monthly payment amount after deferment would remain $557.88.
• Your final payment date would be pushed out by 6 months beyond the original date.
• Nearly all of the first two monthly payments after deferment would go towards paying off the interest that accumulated while your loan was deferred. There is no reduction to your principal during the first month, and very little in the second month.
• After you make all of your remaining payments within your term, assuming you pay $557.88 on your due date, you would owe a final payment of about $1,550 (about $990 higher than usual).