I have monthly IBR repayment amount that does not cover my interest payments.  I know that the federal government is supposed to cover any unpaid interest for my subsidized loans for the first three years of repayment.  However, the unpaid interest continues to accrue in on my subsidized loans, and there is no evidence that the unpaid interest is being paid by the government.

I have asked my loan servicer MyFedLoan to explain this but have only received generic responses parroting back the IBR regulations and policies (e.g. “you are not responsible for any interest that accrues on your subsidized loans”).

However, everything in my account indicates that I am in fact responsible for the accrued interest.  For example, if I select on of my subsidized loans for a Payoff Amount, the Full Payoff Amount includes the accrued, unpaid intereest.

Is there anyone else who has had the same issue? or
Does anyone know when the government pays the unpaid interest (perhaps it is done annually and not monthly?)

Thanks!

Hmm.  I have not heard this complaint before but I’m glad you are watching it.  I’d love it if other borrowers could check their accounts and weigh in on this.  I think deciding what to do about it should be informed by whether or not this is a systemic problem across servicers or what.

My wife’s federal student loan interest is also accruing even though she graduated less than three years ago. However, she had a several year break in service between her undergraduate and graduate studies. Is it possible that her three year interest grace period expired when she was paying her loans back after her undergrad studies? 

Her newer grad loans were for much more money and the interest grace period would make much more of a difference now. It seems like she should at the very least be granted an additional grace period for the interest on the new loans she had to take out for grad school.

If your monthly IBR payment amount does not cover the interest that accrues on your loans each month, the government will pay your unpaid accrued interest on your Subsidized Stafford Loans (or the subsidized portion of your consolidation loan) for up to three consecutive years from the date you began repaying your loans under IBR.

Before 2012, a borrower could get some subsidized loans in grad or professional school, but now subsidized loans are only available for undergraduates who demonstrate need, and only in limited amounts.

I’m in the same position as the original poster (in first three years of IBR, monthly payment less than monthly interest, interest keeps accruing, same loan servicer) and have the same question. When does the gov’t pay that accrued interest? I’m not worried about that interest capitalizing, but I’d like to see it paid, particularly as I’d like to be able to apply my tax return to my loans’ principal. Apparently any extra payment I make will first go to any unpaid interest, which I obviously don’t want to do if the gov’t will pay that for me. But when will that happen?

I have the exact same issue as the OP.  Fedloan servicing keeps accruing the interest on my subsidized loan when my payment requirement is less than the interest.

I think latest proposed PAYE changes would cover interest forever to avoid ‘ballooning’ balances.