<p>Hi,</p>
<p>I got this following msg from the direct loan gov website</p>
<p>Interest Statement</p>
<p>To avoid or reduce interest capitalization, you can choose to pay all or a portion of your Total Unpaid Interest now. If you choose to pay later, please see the Payment Information section of this statement for more specific payment information.</p>
<p>So we have to pay interest while we are in college?</p>
<p>If you have subsidized student loans the govt pays the interest on them until you graduate or drop below half time plus a 6 month grace period (or 9 for the Perkins).</p>
<p>If you have unsubsidized student loans or parent PLUS loans you are responsible for the interest from the day the loan is disbursed to you. There is an option to defer the interest until you graduate/drop below half time. The interest will continue to accumulate and will be added to the loan balance.</p>
<p>Do you already have loans? When you do the online counseling and Master Promissory Note that you are required to do before the loans are dispersed this is all explained there. In fact I seem to recall there being little quizzes to verify that you understand everything entailed in the loan - interest, repayment etc etc.</p>
<p>If it’s an unsubsidized federal student loan you don’t need to pay interest while you’re in college, but the interest will accumulate while you’re in college and so the amount you’ll have to pay back will keep compounding. That means that if you have a $1000 loan and in the first year that loan accumulates $50 of interest due, then the next year you’ll have $1050 dollars accumulating interest. That $1050 dollars would accumulate something like $53 dollars of interest in your second year, coming to $1103 dollars total owing. Third year the $1103 dollars accumulates interest at the same rate… you see where this is going, right? (And I’m not even considering the amounts you borrow in subsequent years.)</p>
<p>When you graduate, you’ll be owing more than you originally borrowed. If you pay the interest while you’re in college, then it doesn’t keep accumulating (interest being charged on interest) and you’ll leave owing the same amount as you borrowed.</p>
<p>If you or your parents can afford it I recommend paying the interest while in school. The cost is generally not too high and that compounding rentof2 can hurt.</p>
<p>Thank you guys for the help :)</p>