does student loan interest accumulate while you're in school?

Question

in other words could i max out my student loans, invest the extra money, pay it all back immediately upon graduation, and be ahead?

there is excess of about $2000
i can invest at 6%

Answer 1

It depends on the type of loan.

Loans like the Federal SUBSIDIZED Stafford Loan and the Federal Perkins Loan remain interest-free until after you graduate. Stafford repayment (and interest) begins 6 months after you leave school (graduate, withdraw, drop to less-than-half-time, or otherwise go inactive), while Perkins interest doesn't begin until 9 months after you leave school. So, if you borrow $2000 in Perkins Loan funding and remain in school, full time, for the next 4 years or so, your loan still be $2,000 when you graduate. 9 months later, interest will begin to accrue.

By contrast, most student loans DO accrue interest while you are in school. Federal UNsubsidized Stafford Loans and Federal PLUS loans will accrue interest the whole time you're in school. Most (if not all) private educational loans will accrue interest at a rate of AT LEAST Prime minus 1% (if your credit is excellent) and usually much more (could be as much as 20%+).

Investing your student loan refund this way isn't a horrible idea. It certainly beats spending it on nonessentials (shoes, vacations, ebay). Just make sure that you stick to your original plan and pay off your loans before the interest begins to accrue. I would recommend getting monthly statements which you read carefully just to make sure that your interest is still deferred.

Answer 2

1

Answer 3

Student loan interest does accumulate while you are in school. Lets look at the flaws in your plan. First you can only borrow according to the percentage needed to pay for your school. So there is no way to max them out. Second, if you could, what if you couldn't find the kind of job you expect to have once you have finished school? Then they payments on those loans would be so high you couldn't pay for a house or a car to get back and forth to work. And what if life happens...pregnancy, marriage, sickness. There are too many variables to count. Just borrow what you need and leave the rest alone. That is the only way to be safe and not in a situation you can't get out of. Because if you ever can't pay, they can garnish your wages, take your income tax refunds and make it so you can never buy anything on credit again. And while this is happening, it is still drawing interest.

Answer 4

interest can accummulate onto non need based loans (including private loans) and there is a cap that student can borrow. Also, the cap varies on your status (i.e. if you are independent or dependent or grad/professional studnet)

You could invest the remaining loan money that has been disburse to you, if all of your other expenses have been paid. so say, you were giving 5000 in the fall semester and after books and supplies and tuition, you have 2000 remaining, you could invest the 2000. Hoepfully you will be able to get a good return off of it and there are no penalties for early withdrawal.

Answer 5

interest accumulates continuously. that's why it is adviseable to pay off as much as a threat each and each month. The funds are recalculated once you ask to pay the loan off or once you regulate the charge schedule.

Answer 6

no it shouldnt do as you only start repaying after you begin to earn over £15k a year

Answer 7

No sweety they are a set amount!

Answer 8

I doubt this is feasible