Posts Tagged ‘Debt Relief’

Taming Student Loan Debt With Prepayments

November 23rd, 2022

Today, two-thirds of college students leave school with at least some debt from college loans. The average debt is approaching $25,000, a figure that includes not just the original amounts borrowed but, for most students, accumulated interest as well.

For students who hold government-issued federal student loans, repayment on those loans won’t begin until six months after graduation, at which point most students will enter a standard 10-year loan repayment period.

Loans That Sit, Getting Bigger

While a student is enrolled in school at least half-time and during the six-month grace period after the student leaves school, even though payments on federal school loans aren’t required, interest on the loans continues to accrue.

If the loans are unsubsidized, the accrued interest will be added to the loan balance and capitalized, and the student will be responsible for paying that interest.

With subsidized federal college loans – which have smaller award amounts than unsubsidized loans and which are awarded only to those students who demonstrate financial need – the government will make the interest payments while the student is in school, in a grace period, or in another authorized period of deferment.

The bulk of most students’ college loan debt will consist of unsubsidized loans – loans that get larger as time goes by and you make your way through college, simply because of the buildup of interest.