$400 interest on a $2000 loan would be 20% rate.
I just want to tell you guys thank you so much for the help. Okay so for the unsubsidize I took out $2000 from it. the fixed rate was 4.29 but after each disbursement I heard it was 1.068% more interest each. so I had two disbursement which would make the interest rate about 6.25%
I don’t think you understand how federal student loan interest is charged. The loan fee you paid of 1.068% is different from the 4.29% interest rate.
Maybe this will help:
@Madison85 OH I see now. The 1.068 fee was for how much I actually received from the loan but I still have to pay 2k regardless of how much I actually got. So 4.29 interest rate of $2000. Do you know what the capital interest I would have to pay before I finish college?
When did you borrow the money? When do you graduate?
.0429 x $2,000 = about $86/year in interest
@madison85 On my fafsa they have the year of 2022 when I graduate but I know for sure I will not be graduating then maybe in 2019 they will eventually change the date. and I borrowed it last year about this time.
@Madison85 So I am literally only spending 400 bucks on interest on a 4.29% ? that is so much lower than I expected.
You are mixing up terms. The amount you borrowed ($2000) is principal. The interest rate is 4.29%. The origination fee is 1.06% (about $20, which was probably deducted from your loan proceeds - you received $1980, not $2000 but you OWE $2000 and interest is being assessed on $2000). Capitalization is when the interest is added to the principal, and student loans only do that when the loan is due if not paid in full or if loans are consolidated; otherwise it is simple interest and you are not paying interest on interest.
When you graduate or leave school, you will have two figures, the amount you originally borrow, $2000 which is your principal, and an accrued interest amount, let’s say $68 per year. If you stay in school for the 4 years, you’ll owe $2000 in principal and $272 in interest ($68 x 4 years). If you want to pay in full, you’ll owe $2272. If you want to make payments, your loan servicer will capitalize the interest, set the payments, and you will start with a balance of $2272 and pay interest monthly on that at the rate of 4.29 until you pay it off. You can pay any amount of the interest or principal during the time you are in school, but TELL the servicer you want your payment applied to interest first, then to principal.
If you borrow another $2000 this year, same thing except the interest rate is 3.76%. You’ll still have an origination fee, so you’ll receive another $1980 in loan principal, and the interest will start to accrue on $2000. Let’s say it’s $66 per year (x 3years=$198), so your payoff 6 months after graduation will be ~$2198.
If you don’t understand, go to your FA office. Have it explained until you understand.