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My son has a small student loan (~approx 5K) that he was supposed to begin payment on this month. His payment would be about $85/month. He applied for an income-based repayment plan, which has extended his repayment commencement by a year. My (dumb) question: Interest will continue to accrue, correct? At the original loan term?
He hasn't had to sign a new loan terms document, so I'm assuming the original interest rate/terms still apply. Please set me straight if there's something I'm not understanding -- thank you!
My son has a small student loan (~approx 5K) that he was supposed to begin payment on this month. His payment would be about $85/month. He applied for an income-based repayment plan, which has extended his repayment commencement by a year. My (dumb) question: Interest will continue to accrue, correct? At the original loan term?
He hasn't had to sign a new loan terms document, so I'm assuming the original interest rate/terms still apply. Please set me straight if there's something I'm not understanding -- thank you!
Interest would generally accrue during this period. Assuming that he has federal student loans (I wager he does given that he's going on an income driven repayment plan), however, interest will not accrue for six months from the September 1, 2023 COVID forbearance end: https://studentaid.gov/announcements...-zero-interest
That said, he can still choose to start paying on his loans earlier; just call up his servicer and get that out of the way. Think of it this way. The earlier he starts paying, the sooner his loans will be paid off. And for the next six months, he'll just be paying down the interest, too. It would be one thing if you son is experiencing financial hardship to the point where this year-long pause is welcome. If that's not the case, I'd strongly encourage that he start repaying sooner based on what I wrote above.
NEVER, ever, capitalize interest regardless of the interest rate or deferral.
Build good financial habits sooner than later.
Agree. Doesn't your son have any income OP? Maybe he should consider generating some and learn what it takes to get oneself out from under debts. A fairly gentle lesson at only $85 per month!
Agree. Doesn't your son have any income OP? Maybe he should consider generating some and learn what it takes to get oneself out from under debts. A fairly gentle lesson at only $85 per month!
Yes, he has an income...and yes, he has a healthy understanding of how debt works.
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