My goal is to be debt free exiting college, because my tuition is being paid for through my sub/unsub loan with the addition to the parent plus loan. Currently I don’t have a job, but I will 100% have one by January 2019 ($15 minimum wage w/ around 24 hours a week). I took out maximum loans (3500 sub, and 2000 unsub). I want to get a head start of understanding how repayments are going to work while I’m in school and how I should go about it, because I’m still really confused about it all. Currently my unsub loan is acquiring interest, but when is that interest going to be capitalized, and is the interest that is building on that loan only on the $1000 or $1000+ the previous interest. Sorry I really don’t understand this much, I would hope someone could shed some valuable light.
Direct student loans are simple interest, so do not capitalize. If you want to pay the interest as it accrues, you can pay it monthly or quarterly or all at the end.
Your accrued interest will capitalize once, if you consolidate all the separate loans into one payment at graduation. You could pay all the accrued interest just before that happens to avoid capitalization too.
Personally, I believe you should borrow less if you can afford to make the payments while you are in school. The direct loans have an origination fee, so if you borrow less, you’d save on the origination fee.
Interest sits in a separate bucket from your loan until the moment your grace period ends (6 months after you graduate, leave school or drop below half time). At that time, the interest capitalizes, your loan balance grows, and you will start to accrue interest on the internet. Before that, interest only accrues on the amount you borrowed.
Go to studentloans.gov & read about repayment. It is important to thoroughly research what you are getting into when you borrow. Keeping the amount borrowed as low as possible is wise, paying it back as quickly as possible is best … and understanding repayment options is critical. If you can’t afford the ten year standard repayment amount, you can get into an income driven repayment plan.
Oh okay that makes sense, but will there be an affects if I pay on the principal too?
Start repaying the unsub loans first…
24 hours a week for a full time undergrad is ill advised. It looks like you are a college freshman in CS? UNless you are a part time student, this would be counterproductive. See if you can get 12 hours a week or so if you are truly a FT CS undergrad in semester 2 when you start your job. See how your first semester went. If you struggle in your first year, you may never be a CS graduate. Are you in calc 1 this semester?