Accrued interest is the amount of interest on a loan that accumulates during a specified period of time on the principal balance. The higher the principal balance, the higher the accrued interest will be.

Some educational loans put off paying the loan until the education is complete. When looking for loans, find out how they calculate the accrued interest. If the lending agency will start accumulating the interest immediately upon receipt of the loan, even before you have to start paying it back, you are going to end up owing more on the loan. If the interest is deferred along with the payments, you will save money.

Another way some lenders do their education loans is by allowing the borrower to pay on the interest while in school, and begin making larger payments that go towards the principle after the education is completed. In this way, the accrued interest begins when school begins, but the borrower is at least making headway on paying back the loan.

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