Why Is My Student Loan Balance Not Going Down?

If you have student loans, you might wonder why your student loan balance isn’t going down even if you pay hundreds or even more than $1,000 every month. Here are some reasons why your student loan balance isn’t going down.

A large outstanding balance 

A large outstanding balance will force you to pay a large monthly payment even if you have a very good interest rate.

For example, if you have $200,000 in outstanding student loans at a 5% interest rate and a 25-year term, your monthly payment will still be $1,169.18. Even if you have a high income, have a low-interest rate and manage your money well, a large outstanding balance could be hard to pay off.

A high interest rate

Another big factor that will keep you from being able to lower your outstanding balance is your interest rate. Small differences in your interest rate can make a big difference in how much of your payment goes toward your principal balance versus the interest. It can also make a huge difference in how long it takes to pay off your loan. 

Let’s take a look at two individuals, Sally and Bob. They each owe $150,000 and pay $1,000 a month on their student loans. The only difference is the interest rate: Sally’s is 6%, and Bob’s is 7%.  

Sally: 6% interest rate ($150,000 loan and paying $1,000 a month)

Time to repay the loan: 23 years, two months (278 monthly payments).

Interest paid: $127,952

Bob: 7% interest rate ($150,000 loan and paying $1,000 a month)

Time to repay the loan: 29 years, 10 months (358 monthly payments).

Interest paid: $207,515

Even though there is only a one percentage point difference in the interest rate, Bob won’t finish paying off his student loans until more than six years after Sally has made her final payment.

Even worse for Bob, despite having the same loan balance as Sally at the start of the repayment period, he will have paid $80,000 more than Sally throughout the life of the loan. This example goes to show that interest rates matter a lot!

Paying less than the interest 

Some repayment plans, such as Income-Driven Repayment Plans for federal loans; or loan statuses, including forbearance or deferment, will allow you to make monthly payments that are actually below the amount of interest accruing on your loan.

This may sound good, but there’s a major downside. The unpaid interest gets added to your loan balance. And that interest accrues even more interest. As you can imagine, this situation can quickly spiral out of control, ballooning the size of your loan even as you make payments.

For income-driven plans, the growing balance could also mean a large tax liability when the balance is forgiven at the end of the repayment term.


Your loan balance is $163,000 at 7.32% interest. You are on an income-driven repayment plan and pay $430 a month toward your loan.

That means each month you pay roughly $543 less than the interest accruing. At the end of a 25-year repayment period, assuming the same monthly payment deficit, your loan balance will grow to just shy of $1.5 Million.


Loan balances, interest rates and repayment plans can all make it hard to pay down your outstanding student loan balance. For options like consolidation, refinancing or bankruptcy and other tools that may make repayment easier check out these articles:

Struggling with your student loan debt?

Take our free assessment to see if we can help. Or, schedule a call to learn more.