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Terms to Know
Interest
- An expense of borrowing money that is calculated as a percentage of the amount borrowed
Principal Balance
- The amount owed on a loan or loans at any given time. The principal balance may include capitalized interest.
Repayment Period
- The period during which a borrower is obligated to make payments on his/her loan(s)
Capitalization
- Adding accumulated interest to the principal balance, increasing the total cost of the loan.
- Less frequent is best
- Filing deferment forms late may result in capitalization earlier than expected
- Know when they capitalize interest on your loan -- it may be before your grace period is over!
Grace
period (Stafford Loans only)
- A six-month period before the first payment
must be made on a loan.
- The grace period begins the day after the
borrower ceases to be enrolled at least half time.
- You are automatically put into grace period
- Subsidized loans are interest-free during
grace period
- Unsubsidized loans accrue interest even during
grace period
Subsidized Loans
- Loans which have no interest cost to the borrower during grace and/or deferment periods.
- These include: Federal Subsidized Stafford,
Federal Perkins, etc.
Unsubsidized Loans
- Loans which accrue interest from time of disbursement, including during grace and deferment periods.
- Borrower is responsible for all accrued and capitalized interest.
- These include Federal Unsubsidized Stafford,
Federal Direct, Federal PLUS
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