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Question about repayment of unsubsidized Stafford loans

LurkNessMonsterLurkNessMonster Posts: 2,015Registered User Senior Member
If a student takes out unsubsidized Staffords for undergrad and then goes to graduate school full time, when does he have to start paying them off? While in grad school, or afterward? Thanks for any info.
Post edited by LurkNessMonster on

Replies to: Question about repayment of unsubsidized Stafford loans

  • icedragonicedragon Posts: 2,170Registered User Senior Member
    it starts 6 months after graduating as an undergrad.
  • DebrunsDebruns Posts: 2,722Registered User Senior Member
    I have read that as long as you are in school full time, you don't have to pay them back.
    From financial aid sites:
    After you graduate, leave school, or drop below half-time enrollment, you have six months before you begin repayment. This is called a grace period.

    During the grace period on a subsidized Stafford loan, you are not required to make any payments and no interest will be charged. During the grace period of an unsubsidized Stafford loan, you do not have to pay any principal, but interest will be charged. You can either pay the interest or allow it to be capitalized - or added to your principal balance - upon entering repayment.

    After you leave school or drop below half-time enrollment, you will receive information about repayment and be notified of the date your repayment begins. However, you are responsible for beginning repayment on time even if you do not receive this information. The maximum term to repay your loans is 10 years.

    You should always check with your loan company, but most students seem to get a deferment, others choose to start paying them off.
  • NikkiiLNikkiiL Posts: 1,048Registered User Senior Member
    Stafford loan repayment begins six months after your graduation. If you enter a graduate program at least half-time, your Stafford Loans can be placed back into deferred status. Any time between your undergrad graduation and the beginning of your graduate program will eat away part of that grace period for the undergrad loans. Depending on the school you attend for your graduate program, you may need to request an in-school deferment form from the lender. Some schools participate in the National Clearinghouse where lenders can pull your new enrollment status...other schools do not.

    If the amount of time between the undergrad and grad are more than 6 months, you will have to start making payments on your undergrad loans....be sure not to miss a single payment or your loans may enter default and make you ineligble for additional aid for at least 6 months.
  • thumper1thumper1 Posts: 37,140Registered User Senior Member
    If you enter a graduate program at least half-time, your Stafford Loans can be placed back into deferred status. Any time between your undergrad graduation and the beginning of your graduate program will eat away part of that grace period for the undergrad loans.

    Nikki...could you clarify this. My son graduated from undergrad in May of 2007. His grad program began in September 2007. His loans were put in deferral while he was in grad school. His repayment period began SIX months after his grad school graduation date...the time between his undergrad and grad (2 1/2 months) did not eat away at his grace period. His is a Direct Loan. Perhaps this varies by vendor?
  • DebrunsDebruns Posts: 2,722Registered User Senior Member
    Salliemae, my son's lender is part of the National Clearing House" but I wouldn't rely fuly on them relying information on his grad school, it always good to check. It seems a lot of popular ones are, Citi Bank, Wachovia, etc.
    http://www.studentclearinghouse.org/gls/lenders_servicers.htm
  • kelsmomkelsmom Posts: 12,539Super Moderator Senior Member
    Here is a good explanation, thanks to UCLA's website:
    Federal Stafford Loan Grace Period
    Regardless of whether you received subsidized or unsubsidized funds, your Stafford Loan has a six-month grace period. If you allow your six-month grace period to elapse after leaving school, your Stafford Loan will not be eligible to receive a new grace period in the future. However, if you interrupt your initial grace period by going back to school, enroll in enough units to maintain at least half-time status in a qualifying course of study and file the appropriate student deferment form, you will be allotted another six-month grace period.

    Many students who have received loans through the Federal Stafford Program question whether or not they are eligible for a new grace period following the conclusion of a deferment, such as an unemployment or economic hardship deferment. For Stafford borrowers the answer is simply no. Once your grace period expires, you will not be issued an additional grace period.
  • Erin's DadErin's Dad Posts: 19,689Super Moderator Senior Member
    But for those people with UNSUBSIDIZED Stafford Loans, this may not be a good thing. Interest continues to accumulate during the time in school and grace periods. If possible, pay off the interest as you go to only have the principal accumulate.
  • DebrunsDebruns Posts: 2,722Registered User Senior Member
    I did that for my son Erin's Dad....and about 1000.00 in principle during the 4 years. Now he will do it if he gets a job while in grad school (which should happen) It can get pretty high if you don't pay on it.
    Paying online was easy, and you can see what loan, the principle/interest ratio, etc. and get emails that it went through.
  • kelsmomkelsmom Posts: 12,539Super Moderator Senior Member
    We pay the interest on D's unsub loan quarterly (we pay some of the principle down at the same time).

    Just a note for those who will be borrowing Perkins loans after July 1, 2010 ... it looks like any Perkins issued after this date will most likely be unsubsidized. That is the wording in the new federal aid legislation. They'll still be 5%, but they'll be unsub ... AND serviced through the DOE, just like Direct Loans (although awarded by schools, like CWS & SEOG, based on the school's rules for awarding).
  • swimcatsmomswimcatsmom Posts: 15,013Registered User Senior Member
    Really?!!! I hope they will fully award any subsidized Stafford loans the student is eligible for before awarding Perkins then. My daughter has had a mixture of both sub Staffords and Perkins though the Perkins has always been pretty small. So far she has never had to have any unsub loans and, as long as she doesn't do anything to lose her scholarship (fingers crossed, so far so good), it looks like she should make it through with just subsidized loans.
  • LurkNessMonsterLurkNessMonster Posts: 2,015Registered User Senior Member
    kelsmom, I've also been paying my daughter's interest quarterly. How do you also pay down the principal? If I just include extra money, above and beyond the interest payment, will the bank automatically apply it to principal?
  • kelsmomkelsmom Posts: 12,539Super Moderator Senior Member
    Lurkness, I send my payment & I note on the check that it is for interest on the loan. The money is applied to pay off all interest, then the excess is applied to the loan itself. I go online first to find out how much interest has accrued, then I send as much as I can comfortably send in excess of the interest. I have made a small dent over the past 2 years.

    Swimcats, if Perkins is unsub (which it probably will be), it will be awarded AFTER sub is awarded. There is a packaging order, and sub is awarded prior to unsub. Perkins would be the next in line, if the student's EFC/other aid puts her in the Perkins group.

    That is, Perkins would be offered prior to Stafford unsub, if student is getting Perkins - since the interest rate for Perkins is 5% & the interest rate for unsub is 6.8%.

    The good news for those who get sub loans is that the interest rate is only 4.5% for loans borrowed in 2010-11.
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