What is the school postponement? | Smart change: personal finance
But interest on private student loans usually accumulates while you are in school. If you defer payments, the accrued interest is often capitalized or added to your principal balance. Once you start repaying the loan, your monthly payment will be higher accordingly.
Do I have to pay interest on federal student loans while postponing studies?
While most federal student loans are eligible for deferral, you will only avoid interest if you have a Direct Subsidized Loan, Perkins Loan, or a subsidized portion of a Direct Consolidation Loan. Interest is always charged on unsubsidized loans or loans that are not based on financial need. You are not always required to pay interest while you are registered, but interest will accrue.
This is true for the direct unsubsidized loans, direct PLUS loans, FFEL PLUS loans and the unsubsidized portion of direct consolidation loans. As with private student loans, interest on unsubsidized federal loans will be capitalized. When the time comes to start paying off your student loans, you’ll face larger monthly payments and higher overall interest charges than if you had made payments while in school.
For example, say you put your loans on hold for 12 months while taking classes. Initially, you borrowed $ 30,000 at 6% interest and you are on the standard repayment plan. With funding, your post-deferral balance would be $ 31,800, a difference of $ 1,800. During your 10-year repayment period, you’ll end up paying $ 2,398 more than if you hadn’t taken a deferral.