how interest works

When you repay your loans, you pay back the original loan amount plus interest.

Each payment is first applied to interest, with the remaining amount paying down the principal balance. If your loan is in default status, there is also a portion of each payment that is applied to the default fee.  In the beginning, most of each payment pays interest. As you continue paying, each payment reduces the principal balance slightly more. Eventually (after about 10 years under the standard schedule, but up to as much as 25 or 30 years under an extended schedule), your principal balance is $0 and you will have successfully paid your loan in full.

For example, if you have $10,000 of debt when you enter repayment, and your interest rate is 8.25%, you’ll actually pay back approximately $14,720 over 10 years ($10,000 principal balance plus $4,720 interest).

The specific amount of interest taken from each payment depends on how many days there are between your payments, the principal balance of the loan, and the interest rate. If you pay late, you end up paying more total interest because there are more days of interest on a higher balance. If you pay extra (even a little bit), you pay off your loan more quickly and pay less total interest because you reduce your principal balance ahead of schedule. This lowers the balance on which interest is calculated, and thereby lowers the total cost of your loan.

To determine the interest rate on your VSAC loan(s), register for or log on to