How To Pay Student Loan Interest While In School
How To Pay Student Loan Interest While In School
Student loan interest is one of the most important factors in understanding your debt. Student loan interest can add up quickly and it’s important to know how much you’ll be paying in interest before you take out a loan. Interest on federal student loans begins accruing immediately after disbursement, so there’s no grace period for paying it off. But if you have federal student loans and are still enrolled in school—either as an undergraduate or graduate student—you have the option to pay the interest that accrues during your grace period or deferment periods. Not paying interest while in school is better than paying interest while in school because doing so can reduce the amount of money you’ll pay over the life of your loan (and potentially save thousands). But paying down those fees while in school has other benefits too:
If you have federal student loans and are still enrolled in school, you have the option to pay the interest that accrues during your grace period or deferment periods.
If you have federal student loans and are still enrolled in school, you have the option to pay the interest that accrues during your grace period or deferment periods. If you opt to pay this interest, it will be added to your loan balance. Unlike private loans, which typically have fixed rates and fees that are set when a borrower takes out their first loan, federal loans include an annual percentage rate (APR) based on a number of factors including credit history and other financial information. The interest rate for each type of Federal Student Loan is as follows:
- Stafford Subsidized Loans: 2.05% – 6.60% APR (based on current rates)
- Stafford Unsubsidized Loans: 5.05% – 8.25% APR (based on current rates)
- Graduate PLUS Loans: 7% – 10% APR
Not paying interest while in school is better than paying interest while in school.
There are two ways to pay student loan interest: when you’re in school and when you’re not. If you pay it while you’re in school, your loans will be deferred and no payments will be due until after graduation. If you don’t pay while in school, they’ll accrue interest that can add up fast.
If you do decide not to pay interest while enrolled, however, there are plenty of reasons why this might make sense for your situation. For example:
- You could owe less over the life of your loan if the balance is lower than $5K or $10K (this is called “principal reduction”)
- Your credit score could take a hit if too many accounts have been opened recently (credit agencies look at how long loans have been open when evaluating scores)
Paying interest while in school can reduce the amount of money you’ll pay over the life of your loan.
Now that you’ve decided to pay interest while in school, there are a few things to keep in mind. First, you should know that interest rates on student loans are higher than they were in the past and will be lower than they will be when you graduate. Because of this, it’s important to make payments while you’re still in school because it reduces the total amount of money you’ll pay over the life of your loan. Additionally, if for whatever reason something happens between now and graduation—say, a sudden illness or job loss—then having paid down your student loans will allow for better payment options than someone with an ongoing balance on their account does not have access too
Take advantage of autopay to save on your student loan interest rate.
- Take advantage of autopay to save on your student loan interest rate. If you have a federal student loan, you can set up autopay to pay back your loans automatically each month. This will result in lower interest payments and better management of your finances throughout the year.
- Remember that setting up autopay is only available for federal student loans and not private ones, so if you have private loans, it’s best to manually pay them back as soon as possible so they don’t accrue any additional interest charges.
You have the option to defer or not defer interest on federal student loans while you’re in school.
You may defer or not defer interest on your federal student loan while you’re in school.
If you choose to defer, interest will be added to the principal of your loan once it begins accruing. For example, if you have $10,000 in student loans with a 6% APR and choose to defer while enrolled at a college that costs $10k per year for four years (or $40k total), then after four years when those loans are due and payable, they’ll be $10,900 each instead of just $10k each because they were accruing while they were deferred.
If you don’t want additional fees tacked onto your balance at repayment time, then make sure when applying for loans that there’s no option for interest to be deferred. Your lender should also notify you about whether or not interest has been waived so keep an eye out for any correspondence from them regarding this issue!
And there you have it! If you’re still in school and have federal student loans, you have the option to pay the interest that accrues during your grace period or deferment periods. This allows you to save money on interest charges while still being able to pay back your loan over time. If paying off your debt is too much for one person, consider finding a co-signer who can help ease some of the financial burden.