Loan Interest

[DRMCB]

If a student takes out the usual government loans (Stafford, etc.), at what point does the interest start to build up? My understanding is that it doesn't start until after graduation for subsidized loans... what about durring residency?

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[Hoosierdaddy]

The interest on both subsidized and unsubsidized Stafford loans accumulates the day you take the loan out. However, the federal government pays the interest on the subsidized loans (generally the first $8500 every year) while you are in med school, but not during your residency. You are resposible for ALL of the interest on unsubsidized Stafford loans. Your loan servicer (Sallie Mae if you are using the MEDLOANS program) should give you the option of paying the interest on your unsubsidized loans off on a semi-annual basis. Your other choice is to capitalize the interest (add the interest to the principal of the loan). Just some advice: it will save you a lot of money (literally thousands) in the long run if you pay the interest off as it accumulates.

 

[electra]

Hoosier is right. Unlike a regular bank loan, which has compounded interest, the interest on your Staffords capitalizes at the end of your med school coursework. This means that you can borrow the money at 5.39% a year. Period. Do the multiplication for four years and that is what will be tacked on. BUT....that money will cost a lot more after your loan goes into repayment. If there is any way that during school you can save $20.00 a month and stick it to your loan, it will save you big bucks in the end.