Please explain subsidized stafford loans

[nickster]

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After I got my notice that I will receive the $8500 loan I got a large scholarship. With this scholarship and cash in the bank I can pay for all 4 years without any debt.
I thought I might take this loan and keep my cash invested. My question is concerning the pay back of this type of loan. I believe there is no interest accrued until graduation but how does the pay back work? Can I just write them a check after graduation for the principle and be charged no interest? If so I'll be ahead by whatever I earned on my investments. Am I missing something or will this work?

 

[okbye]

As long as the whole loan is subsidized it will work, but your scholarship may make you ineligible. The amount of aid you receive cannot exceed the actual cost of your schooling plus room, board, fees, books, all that neat stuff. If the loan goes through the worst they could do is make you pay it back before you graduate but you wouldn't be any worse off for trying.

 

[Zetterberg07]

Be sure you find a lender who will wave your origination/federal default fees.

These two fees will eat up about 3% of your loan money up front if you dont.

 

[dpmd]

You can just write a check for the loan payoff (principal plus any interest that accrued). If you did this the day after you graduate, or within your grace period that amount would just be the amount of the loan that you took out. You do need to check if your lender will waive the fees, and whether that incentive is lost if you prepay the loan. Otherwise, yes it is pretty much as simple as what you said, assuming you report the scholarship to the financial aid office and your revised financial aid offer still includes the loan (it might or might not). You could theoretically be eligible for the same amount every year (depending on your financial situation). I would just be very careful about what you do with the money. It would suck to lose it all and end up having to pay it off yourself.

 

[Lesley]

After I got my notice that I will receive the $8500 loan I got a large scholarship. With this scholarship and cash in the bank I can pay for all 4 years without any debt.
I thought I might take this loan and keep my cash invested. My question is concerning the pay back of this type of loan. I believe there is no interest accrued until graduation but how does the pay back work? Can I just write them a check after graduation for the principle and be charged no interest? If so I'll be ahead by whatever I earned on my investments. Am I missing something or will this work?

I don't think you are missing anything. If you can borrow the subsidized portion, $8,500, of the Stafford loan, you will be lent that amount minus a small origination fee. Direct Stafford origination fees can be very reasonable compared to the GradPLUS origiation fees of 3%. Six months after you finish your schooling and residency, when you no longer qualify for deferment, you can pay off the note before any interest is due, or you may find that money comes in handy during school or residency to pay for bills that are yet unforeseen. Good Luck.