‘It’s my fault I didn’t do more research’: A woman owns up to the $170,000 private student loan she says trapped her

A woman is warning other students about private student loans after watching a $120,000 balance grow into a $170,000 debt by the time she finished school. As detailed by the Daily Dot, she shared her story on TikTok to explain how quickly the balance had ballooned. The case has drawn attention to how private student loan interest actually works from the moment a borrower signs.

She explained that she originally took out $120,000 in private loans to fund her undergraduate degree, operating under the assumption that interest would only become a major factor once repayment began after graduation. Instead, she discovered the interest on her private loans was compounding daily starting from the very first day of her studies. By the time she finished her four year degree, she had amassed roughly $50,000 in compound interest, bringing her total debt to $170,000.

In the TikTok video, captioned “What they don’t tell you about student loans,” she urged other students to research their loan terms carefully before signing any paperwork. She did not specify whether the terms were clearly laid out to her at signing, but said she was simply unaware of how the process worked. Responding to a comment suggesting loan departments take advantage of young borrowers, she wrote, “It is and it’s my fault I didn’t do more research on them,” adding that she was “10,000% on the hook” for the loan.

Daily compounding interest turned this loan into a much bigger bill

The story spread from TikTok to X after user @WallStreetApes reshared it, and the post reached more than 42,000 people on that platform. The reaction mirrored what played out on TikTok, with commenters criticizing the lending system. One user wrote, “The debt trap is predatory and government student loans are no better,” while another added that the entire lending system is “characterized by predation.”

The debate over private lending arrives amid other debt related stories drawing attention this week, including a $550 million medical debt erasure benefiting 260,000 Californians. For many private student loans, interest begins accruing while the borrower is still in school, meaning the amount owed at graduation is typically higher than the original amount borrowed. A key mechanism behind that growth is capitalization, which happens when accrued interest is added to the loan’s unpaid principal balance, after which interest starts accruing on that larger total.

Federal subsidized loans differ in that the government covers interest while the borrower is in school, but most other loan types do not work that way. For example, a $5,000 loan for a 12 month program at a 10 percent annual rate would accrue $500 in interest during school and another $250 during a typical six month grace period.

Capitalization would then add that $750 to the principal, so interest would continue accruing from a new total of $5,750. Broader concerns about compounding consumer debt have also surfaced elsewhere recently, including a banking collapse warning from crypto figure Arthur Hayes tied to rising household debt.

Private loans typically trigger capitalization when a grace period, deferment, or forbearance ends, according to guidance from the Consumer Financial Protection Bureau on how interest accrues during school.

The woman said she is currently working to pay off the full $170,000 balance.