In 2015, I paid a total of $8,600 towards my federal student loans, of which $3,404.46 satisfied interest with a 6.25% interest rate. Recognizing federal student loans utilize a simple interest formula (compounded daily), I was shocked to learn I paid more in interest in 2016 while I paid almost $3,000 in total towards my loans. Furthermore, my interest rate even decreased from 6.25% to 6.125% as I signed up for direct debt payments.

I contacted FedLoan Servicing to understand the increase in interest paid even though the principal balance decreased, I was advised it was due to the frequency of my payments (e.g. $600 once a month, vs $300 twice monthly). However, the frequency of my payments is extraneous (I think) as interest accrues daily based on a simple interest formula. Therefore, the amount I pay interest that month doesn’t change weather I make one $600 payment or two $300 payments?

Please see below:

2015
Total paid: $8,600
Interest paid: $3,404.46

2016
Total paid: $11,394.97
Interest paid: $3,618.92

I paid an additional $214.46 in interest during 2016 even though I paid an additional $2,794.87 in total towards my loans. I’m challenged in understanding how this is possible when I do not have any outstanding payments or capitalized interest, my interest rate decreased, the principal decreased, and I paid almost $3,000 more than 2015.

Am I missing something or did my federal loan server make a mistake??