That needs to change pronto. It is the sort of detail to which competent legislators would pay attention, as they revised the laws about student loans and made them, once again, fully dischargeable in bankruptcy proceedings.
But our legislators are mostly a gang of thieves and have no interest in fixing these problems.
Back in the day when I was in college you took out a federal student loan. After you left school you had a 9 month grace period then started making payments at about 2% interest beginning at the end of the grace period.
When student loans were overhauled under Obama one of the things they did was allow higher interest rates and they did this thing called capitalization where any principle on the books at the end of the grace period had it’s interest calculated from the day the funds were dispersed. That interest is added to the principle and interest in calculated on both, the outstanding principle and the interest from day one.
So, if a student takes out $20k their first year and don’t make any payments until the end of the grace period say 5 years later, they will have about $8k added to the principle $20k so now the amount owed is $28k and you pay approx. 8% interest on the $28k
Imagine the nightmare when the student borrows $80k? After the
grace period the loan becomes $95k at 8% interest. Even students that find good employment and want to make payments are looking at a tough row to hoe.
If the government really wanted to reform student loans they they should go back to the old system. My $9k student loan from the late 1970s had added about $200 interest in total.
The system is designed to make young people slaves to the government.