Someone help me understand how federal student loan interest rates work?

[Lilyo]

I'm confused about the following example
[IMG]http://i.imgur.com/yUoahTD.png[/IMG]

Isn't 6.8% of $5,500 $374? Where is the $2,262 coming from? I don't understand how a 6.8% interest loan adds more than 40% interest on the initial value?

[OnDemand]

Shit man that looks like compound interest. Holy shit..

[Propane Addict]

If you call your financial aid office at whichever university you may be attending, they should be able to fully explain it to you in a way you can understand.

[Galactic]

6.8% yearly. Most student loans compound daily at a rate of 1/356th of their percentage. meaning it's better to pay off a chunk of your loan today than tomorrow. The huge difference between what you owe at the beginning and what you owe at the end is because the interest is being counted at 6.8% per year for about 10 years.