Stafford Sub Loan Question

[Alienwho]

I know that payments aren't required for the Stafford Sub Loan until 6 months after graduation. The interest rate right now is 6%. Assuming I pay off the loan the day I graduate (or anytime before those 6 months), am I still subject to the 6% interest?

In other words, if I take a $1000 stafford loan, am I going to pay back the $1060 regardless of whether I pay it back the day of graduation or 5 years later?

Sorry if it's a dumb question. I've never taken a loan before and I'm wondering if we should use the offered loan for my wife.

 

[ggnl]

I don't think so. The gov't is actually paying interest for you while the loan is deferred (hence the "subsidised" part), so you should be free and clear if you pay it off before it comes out of deferrment.

 

[Gunslinger08]

FYI, the 6% is annually, not once. So if you held the loan for 5 years, you would pay a good deal more than $1060.

 

[Alienwho]

Awesome. If that's the case then, there is no reason not to take the loan? Free borrowed money as long as it's paid back on time?

I could pay for the school straight up but it would put a dent in the rainy day fund. I know my wife could graduate and easily make that money to pay it back a few months after graduation.

 

[Special K]

Originally posted by: joshsquall
FYI, the 6% is annually, not once. So if you held the loan for 5 years, you would pay a good deal more than $1060.

Yeah, plug your loan information into an amortization calculator to see exactly how much interest you will pay each month, and over the life of the loan. It sounds like your understanding of how interest works is way off base, and it will only benefit you in the future to learn how it works now, even if you do decide to pay the loan off.

To answer your question, you most likely have a grace period following graduation in which no interest will accrue, and no payments will be required, so if you pay it off during that time, you won't owe any interest.

 

[Alienwho]

Originally posted by: Special K

Originally posted by: joshsquall
FYI, the 6% is annually, not once. So if you held the loan for 5 years, you would pay a good deal more than $1060.

Yeah, plug your loan information into an amortization calculator to see exactly how much interest you will pay each month, and over the life of the loan. It sounds like your understanding of how interest works is way off base, and it will only benefit you in the future to learn how it works now, even if you do decide to pay the loan off.

To answer your question, you most likely have a grace period following graduation in which no interest will accrue, and no payments will be required, so if you pay it off during that time, you won't owe any interest.

Sorry guys I understand interest and knew it was 6% annual, I just typed 5 years while in my mind I was thinking paying after the first year.

Thanks for the info btw.