Student loans (federal or private) are amortizing loans, also called installment loans. You make the same payment every month over the life of your loan to pay it off with interest. But in some cases, amortization can start to work against you, increasing your loan balance instead of decreasing it.
Amortization is just an accounting process that gradually reduces a loan balance over time through equal installment payments. Each payment is split into two portions: principal and interest. While the payments themselves stay the same, the interest and principal portions change every time.
Student loans sometimes act differently, causing loan balances to increase – an effect called negative amortization. The two main reasons this happens: