Subsidized Loans

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defscott627
Posts: 289
Joined: Fri Jun 29, 2012 3:46 pm

Subsidized Loans

Post by defscott627 »

I'm 26 and I have 4k in subsidized loans from undergrad. They are currently in deferment until May 2013 because I am a Master's student. Does that mean I will not have to pay any interest on these loans during deferment because they are subsidized? Or were they only subsidized during my undergraduate tenure.

I was going to pay off this 4k loan, but if the interest is subsidized, it would be better if I just kept it in my credit union checking account until next year.


Thanks!
Erik
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burgrat
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Re: Subsidized Loans

Post by burgrat »

The interest should be paid if you are continuing in a Master's program if the loans are subsidized. You may have to contact the lenders to provide proof of student status. If you are going to hold the cash in a credit union account, how must interest will you get? I would imagine it would be fairly small. If I had the money, I would pay it off for the piece of mind instead of holding out for a very small amount of interest (which is taxable, btw).
Topic Author
defscott627
Posts: 289
Joined: Fri Jun 29, 2012 3:46 pm

Re: Subsidized Loans

Post by defscott627 »

It's actually rather decent. I get 3% interest from my credit union NEFCU on my checkings up to $25,000.

I'm assuming they have proof of student status as I am in deferment until May 2013, no? It says it on the direct loans website in-school deferment.
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market timer
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Re: Subsidized Loans

Post by market timer »

If you haven't already used your 6-month grace period, they likely won't accrue interest until Nov 2013 (six months after your graduation/separation from grad school).
TA_Lurker
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Re: Subsidized Loans

Post by TA_Lurker »

erikjscott wrote:It's actually rather decent. I get 3% interest from my credit union NEFCU on my checkings up to $25,000.
The difference between the simplest scenario (you paying off the loan immediately) vs. the optimal scenario (maximizing the period of interest loan deferment) is $120 (3% on $4,000). What's $120 worth to you? For just $120 I'd rather wipe out the debt than manage a deadline, but I prefer to simplify life as much as possible.
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