Student loans have a repayment structure that differs from most other loans in one important way: interest can start accruing long before the first required payment, sometimes years earlier, during the time a student is still in school. Whether that accrued interest gets paid along the way or left to build up changes the total repayment amount substantially.
When interest starts accruing
For some loan types, interest begins accruing from the day the loan is disbursed, not from the day repayment starts, meaning a loan taken out in a first year of school can accumulate several years of interest before the borrower makes a single payment. Other loan types cover interest during the in-school period, so the amount owed doesn't grow until after graduation or the end of a grace period. Which category a specific loan falls into changes the effective total cost significantly, since accruing interest during a multi-year study period adds up even before regular repayment terms apply.
Why capitalization makes unpaid interest compound
If accrued interest isn't paid during school or a grace period, it's often capitalized when repayment begins, added directly to the principal balance. From that point forward, interest is charged on the new, larger principal, meaning the loan is now accruing interest on interest that was never paid. This is the mechanism that can make a student loan's total repayment noticeably exceed what a simple rate-times-principal-times-years estimate would suggest, since the effective principal at the start of repayment is higher than the amount originally borrowed.
Making even small interest-only payments during school, when allowed, prevents this compounding by keeping the accrued interest paid down before it capitalizes, which is often a far smaller monthly commitment than it sounds and can meaningfully reduce total repayment over the life of the loan.
What actually drives the final repayment total
Once regular repayment begins, a student loan behaves like most other installment loans, EMI is driven by the (now possibly capitalized) principal, the interest rate, and the repayment term, with longer terms lowering the monthly payment but increasing total interest paid, the same trade-off that applies to any reducing-balance loan. The Student Loan Calculator lets you compare scenarios, with and without in-school payments, different repayment term lengths, to see how much each choice changes the total amount repaid over the life of the loan.