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Why Do They Recommend Making Some Payments on Unsubsidized Loans While You’re Still in College?

Shreyash Rane by Shreyash Rane
May 22, 2023
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Why Do They Recommend Making Some Payments on Unsubsidized Loans While You’re Still in College?
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Why Do They Recommend Making Some Payments on Unsubsidized Loans While You’re Still in College?

As a college student, you may have taken out student loans to help you pay for your tuition fees, books, and other expenses. These loans can be subsidized or unsubsidized, and while both types of loans can help you cover your expenses, there are key differences between the two. Unsubsidized loans accrue interest while you’re still in school, and this interest can add up quickly. That’s why many financial experts recommend making payments on unsubsidized loans while you’re still in college. In this article, we’ll explore the reasons why making payments on unsubsidized loans while in college is recommended.

Making payments on unsubsidized loans while you’re still in college is generally recommended because it can help you save money in the long run. Unsubsidized loans accrue interest from the day they are disbursed, which means that interest is constantly adding up on the balance of the loan even while you’re in school.

By making payments on the interest while you’re in school, you can prevent it from capitalizing (being added to the principal balance) when your loan enters repayment after you graduate. If the interest capitalizes, it will increase the total amount you owe on the loan, and you will end up paying more in interest over the life of the loan.

By making payments on the interest while you’re still in school, you can keep the loan balance from growing and avoid paying more interest in the future. Additionally, making payments while you’re still in school can help you get into the habit of making payments on your loans, which can be beneficial when you enter repayment after graduation.

Student loans are a common way for college students to pay for their education. While they can be incredibly helpful, they can also be overwhelming and confusing. One of the key differences between subsidized and unsubsidized loans is the way that interest accrues. Subsidized loans don’t accrue interest while you’re in school, but unsubsidized loans do. This can lead to more debt and higher monthly payments after graduation. In this article, we’ll explore why making payments on unsubsidized loans while in college is a smart financial move.

The Difference Between Subsidized and Unsubsidized Loans

Subsidized loans are loans that don’t accrue interest while you’re in college or during deferment periods. The government pays the interest on these loans, which means you’ll only owe the principal amount when you start making payments. Unsubsidized loans, on the other hand, accrue interest while you’re in school. This means that the longer you take to pay off your loan, the more interest you’ll owe.

Why Unsubsidized Loans are More Expensive Than Subsidized Loans

Unsubsidized loans are more expensive than subsidized loans because they accrue interest while you’re in school. This interest is added to the principal amount, which means you’ll owe more money when you start making payments. The longer you take to pay off your loan, the more interest you’ll owe, which can significantly increase the total cost of your loan.

The Benefits of Making Payments on Unsubsidized Loans While in College

Making payments on unsubsidized loans while in college can help you save money in the long run. By making payments while you’re in school, you can reduce the amount of interest that accrues on your loan. This can help you save hundreds or even thousands of dollars over the life of your loan. Additionally, making payments while you’re still in school can help you establish good financial habits and reduce your debt burden after graduation.

How to Make Payments on Unsubsidized Loans While in College

Making payments on unsubsidized loans while in college is fairly simple. You can usually make payments online through your loan servicer’s website. If you have multiple loans, you may need to make separate payments for each loan. You can also set up automatic payments, which can help ensure that you never miss a payment. If you’re not sure how to make payments on your loans, contact your loan servicer for assistance.

FAQs

Can I make payments on my subsidized loans while in college?

Yes, you can make payments on your subsidized loans while in college. However, since these loans don’t accrue interest while you’re in school, making payments won’t have as significant of an impact on the total cost of your loan.

How much should I pay on my unsubsidized loans while in college?

The amount you should pay on your unsubsidized loans while in college depends on your financial situation. If you can afford to make payments, even small ones, it’s a good idea to do so.

Can making payments on my loans while in college affect my credit score?

Making payments on your loans while in college can help you establish good credit habits. As long as you make your payments on time, it can have a positive impact on your credit score.

Can I still defer my loans if I’m making payments while in college?

Yes, you can still defer your loans if you’re making payments while in college. However, making payments can help you reduce the amount of interest that accrues on your loan, which can help you save money in the long run.

What happens if I don’t make payments on my unsubsidized loans while in college?

If you don’t make payments on your unsubsidized loans while in college, the interest will continue to accrue, and you’ll owe more money when you start making payments. Additionally, you may be charged late fees or go into default, which can have serious consequences for your credit score and financial future.

Also Read: What Are Three Possible Consequences of Defaulting on a Car Loan?

Conclusion

Making payments on unsubsidized loans while in college can help you save money and establish good financial habits. By reducing the amount of interest that accrues on your loan, you can reduce the total cost of your loan and reduce your debt burden after graduation. If you’re not sure how to make payments on your loans, contact your loan servicer for assistance.

 

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