I often get contacted by people who are terrified and bewildered by their student loan balances. They originally borrowed a certain amount, and that balance has grown enormously over time. How is this possible? How did they get here? How is this okay?

Well, it has to do with how interest accumulates, how you are repaying your loan, and how things went wrong along the way (such as by defaulting). Let me walk you through an example where a student loan can double in under 10 years.

Sally takes out, say, $45,000 in federal student loans. In this example, let’s say that one-third of those loans, $15,000, are “subsidized” (meaning the government pays interest while Sally is in school) and the remaining $30,000 is “unsubsidized” (meaning interest accrues while she is in school). I’m going to give these loans an interest rate of 6.8%, a fairly average interest rate for federal student loans (current rates are lower, but they will increase again in the future).

STARTING BALANCE: $45,000

Step 1: While in School. Let’s say Sally is in school for 5 years, and for the sake of simplicity, I’m going to say she took out all of those loans during her first year. During those five years, no payments are due, and interest does not accrue on the $15,000 of subsidized loans. Interest does, however, accrue on the $30,000 of unsubsidized loans at 6.8%. That’s over $2,000 per year in interest accrual, and by the time Sally graduates after 5 years, her overall loan balance is $10,200 higher than it was when she started, all because of interest.

NEW TOTAL BALANCE: $55,200.

Step 2: Grace Period. Sally gets a six-month grace period after she graduates, to allow her to find a job and get situated. No payments are due. Interest now accrues on the entire original principal balance, adding another $1,530 during the six-month period.

NEW TOTAL BALANCE: $56,730

Step 3: IBR. Sally gets a job during her grace period. Hooray! She selects Income-Based Repayment (IBR) as her repayment plan, so that she can have affordable payments based on her income (she really can’t afford any of the other repayment plans, which would have monthly payments of several hundred dollars per month). She works as an office assistant with $30,000 in gross annual income, yielding her an IBR payment of approximately $160/month. Not bad, except interest is continuing to accrue on her loans, and $160/month only covers a portion of the accumulating interest. Even while making her payments, Sally manages to add another $1,200 of interest to her balance in one year.

NEW TOTAL BALANCE: $57,930

Step 4: Extended Forbearance. IBR has a 25-year forgiveness provision so that whatever balance remains at the end of the repayment period will be forgiven, even if that balance has not been paid down. But Sally loses her job after one year and faces a severe economic hardship. She can no longer afford any student loan payments, so she leaves the IBR program and goes into forbearance, which allows her to postpone her payments. She struggles for many months, taking odd jobs and trying to stay afloat, and she continues to reapply for forbearance. The problem with forbearance is that all of your outstanding interest gets capitalized (added to the principal balance) and interest continues to accrue on that larger balance during the forbearance period. After three years of forbearance, Sally’s loan balance has increased dramatically.

NEW TOTAL BALANCE: $69,750.

Step 5: Default. Sally runs out of forbearance after 3 years. Although she could try to get back onto IBR again, she is not aware of this, and her student loan servicer does not inform her that this is even an option (which is an absolutely tragedy, but happens all the time). Sally is delinquent for 9 months, during which interest continues to accumulate, along with late fees and penalties. When she defaults, her federal lender sends the loan to a collection agency, and now collections costs of 18.5% of the new, higher loan balance is tacked on.

NEW TOTAL BALANCE AT DEFAULT: ~$75,000

NEW TOTAL BALANCE IN COLLECTIONS: ~$90,000

So there you have it, folks. This is how a $45,000 loan can double in less than 10 years. I see this all the time, and it really is astounding. I’ve said before, and I’ll say it again: we need major student loan reform in this country.