Paying interest on student loans while in school

Paying for College
1

<h2>My FAFSA came back for the University of Minnesota, and one of the loans listed in a SELF loan, from the Minnesota Department of Education. I'm trying to figure out whether or not this is better than a private loan and if i should accept it. The weird thing about it is it expects students to pay quarterly interest while in school, so i would be paying interest with the money i took out, in other words, paying interest with the money they're charging me interest on. The interest rates and description is complicated:</h2>

<p>The interest rate charged to the borrower changes throughout the life of the loan, and can change every three months.</p>

<h2>Phase II As of July 1, 2008 the interest rate is 5.0%. The interest charged is the sum of the margin, which is currently 2.0%, added to the index, which is based on the average quarterly sale price of the 13-week Treasury Bill. The index rate is currently 1.75%. The interest rate cannot increase or decrease by more than 2% in any 12-month period. Because of this restriction, the interest rate was adjusted to 5.0%. The historical average rate since 1988 is 6.2%. No new loans are being made under Phase II.</h2>

<p>Its only for $2,750, so I'm going to need another $8,000 or so in private loans on top of that and my Ford Federal Direct Unsubsidized anyways (I think the Ford is the Stafford? Stupid U is trying to make things as confusing as possible) </p>

<p>Yet, I dont think the Minnesota government would have a loan program unless it was better than private loans, but why would the fools make students pay interest while in school? How do they expect us to pay it?
And for a loan of 2,750 with those confusing rates, how much would those quarterly payments be?</p>

<p>I'm so lost.</p>

2

<p>Exactly what is your college goal? </p>

<p>
[quote]
Yet, I don't think the Minnesota government would have a loan program unless it was better than private loans, but why would the fools make students pay interest while in school? How do they expect us to pay it?

[/quote]
</p>

<p>I would suspect that Minnesota is trying to give their residents a break in interest rate while at the same time not go broke or put the taxpayer (the fools) on the hook for defaulted loans; That is why interest is expected to be paid while in school. </p>

<p>Your lesson, before you take out a loan, is to understand that a loan is "Renting" the use of someone's money. </p>

<p>You can ignore, phase II, because "no new loans are being made under phase II."</p>

3

<p>First of all, I want you to know that it is nigh impossible for students to get student loans without a co signer. To be offered one at all is unusual. There are very few sources of such loans, especially with decent interest rates, even with terrible interest rates. If you can get a better deal, take it, but there are not many out ther for students only.</p>

4

<p>I looked that loan program up. They do require a cosigner.
SELF</a> FAQ</p>

<p>the 'benefit' of paying the interest while you are in school is that it will lower the amount you end up repaying because of the interest being paid while you go along instead of having to pay interest on the interest that is accruing when you are in school. Most loans allow you to do this, but this one requires you to. It seems that interest rate is favorable to a bank private loan or a Plus loan for your parents.</p>