Millions of borrowers are checking their student loan balances in 2025, only to find that instead of shrinking, their debt is growing. If you’re wondering why you owe more than when you started repaying, you’re not alone. The increasing size of student loan balances is a widespread issue, caused by interest accrual, policy changes, and economic factors. Understanding what’s behind this can help you take action before your debt spirals out of control.
1. Interest Accrual and Capitalization
One of the biggest reasons student loan balances grow is interest capitalization. When you pause payments through deferment, forbearance, or income-driven repayment (IDR) plans, interest continues to accrue on unsubsidized loans. If you don’t pay this interest as it accumulates, it gets added to the principal balance—meaning future interest is calculated on a larger amount, causing your total debt to snowball. For example, if you have $50,000 in loans with an interest rate of 5%, and you go into forbearance for a year without making payments, that’s an extra $2,500 in interest added to your balance. The next year, you’re now paying interest on $52,500 instead of the original $50,000, making repayment even harder.
2. Changes in Repayment Plans
In 2025, changes to income-driven repayment (IDR) programs and new student loan policies are affecting how interest accumulates. Borrowers who switch repayment plans often see unpaid interest capitalized, leading to an unexpected increase in their total balance. Some proposed legislation is also adjusting federal student loan forgiveness programs, which could mean longer repayment periods for some borrowers.
3. Inflation and Rising Interest Rates
Economic factors also play a significant role in why student loan balances are growing. In recent years, federal interest rates have increased, making borrowing more expensive. While federal student loan rates are fixed, private loan borrowers and new student loan recipients are facing higher interest rates than before. This means that new loans are more expensive, and existing borrowers who consolidate or refinance their loans at higher rates may end up paying more in interest over time.
4. Extended Repayment Terms Mean More Interest
Many borrowers opt for longer repayment plans to lower their monthly payments, but this strategy can backfire. A 25-year repayment plan instead of a 10-year plan may make monthly payments more manageable, but it also means thousands more paid in interest over the life of the loan. For example, on a $60,000 loan at 6% interest, a 10-year plan results in $19,933 in total interest paid. On a 25-year plan, the total interest balloons to $57,494—nearly double the original loan amount.
5. Rising Tuition Costs Are Forcing Borrowers to Take on More Debt
A key reason student loan balances keep rising is that college tuition keeps getting more expensive. In 2025, the average cost of higher education has increased once again, forcing students to borrow more to cover tuition, fees, and living expenses. Even with scholarships and grants, many students graduate with more debt than previous generations, making it harder to pay off loans before interest takes over.
How to Stop Your Loan Balance From Growing
If you want to stop your student loan balance from increasing, here’s what you can do:
- Pay Interest Before It Capitalizes – Even small payments during deferment or forbearance can prevent your balance from growing.
- Choose a Shorter Repayment Plan If Possible – A longer plan lowers monthly payments but costs more in the long run.
- Stay on Top of Policy Changes – Follow updates on loan forgiveness and repayment programs to ensure you’re not paying more than necessary.
- Consider Refinancing Carefully – Lowering your interest rate through refinancing can save money, but don’t refinance federal loans if you need loan forgiveness options.
- Make Extra Payments If You Can – Even an additional $50 per month can help reduce interest over time.
Final Thoughts: Take Control Before Your Debt Grows Too Large
Understanding why your student loan balance is growing is the first step to stopping it. With interest accrual, policy changes, rising tuition, and extended repayment terms, many borrowers are finding themselves deeper in debt than expected. But by staying informed and making strategic payments, you can reduce the impact of interest and work toward paying off your loans faster. Don’t let your debt spiral out of control—take action now to protect your financial future!