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When Student Debt Payments Restart, Your Loan Type Will Make a Big Difference

When Student Debt Payments Restart, Your Loan Type Will Make a Big Difference

August 09, 2023

When student debt payments restart, understanding the difference between subsidized and unsubsidized loans becomes crucial.


Here are the important takeaways:

*Student loan payments and interest accrual resumes in October and September, respectively.

*Subsidized loans don't accrue interest while in school or during deferment, while the U.S. Department of Education pays the interest in these cases.

*Unsubsidized loans accrue interest immediately, making them more expensive.

*Unpaid interest on unsubsidized loans may "capitalize," increasing future interest payments.

*Pursuing deferment or forbearance may not be the best option, as interest typically continues to accrue.

*Income-driven repayment plans are generally better for borrowers unless the financial difficulty is short-term.

The opinions voiced in this article are for general information only and are not intended to provide specific advice or recommendations for any individual.