Hi Heather,

My student loan was recently just transferred from Direct Loans Dept. of Education to Great Lakes Servicing. I called them yesterday because it appeared my principle balance had actually grown, despite my being on IBR since 2010 to present. I was confused, because I thought that interest was only added to the original principal balance if I was no longer on IBR or qualified as partial financial hardship. Great Lakes said that ” since my transfer,some of the interest has been and will be capitalized”, which didn’t really make much sense to me, since I’ve been on IBR since 2010.

Also, she said that if I go into forbearance, that all of the interest on my loan will be capitalized—is this true? I had her research my loan a little further and am waiting to hear back from Great Lakes.

I am just trying to get a clear idea as to what the rules are on IBR interest capitalization so I can make the best decision going forward.

Thanks!
Scott