Private College Student Loan

How do subsidized Direct loans work?

Okay so i was offered a Direct loan for a college I am attending, I accepted the offer but what I don't understand is, what happens if I decide not to use the loan at all? How does it work? and Why do I have to pay interest? What is interest and would I have to pay it if I don't use the loan at all throughout the school year? Or, does the school automatically use my loans to pay for my classes and such? I also received financial aid.

Public Comments

1. If your school gets more money than you need they will refund the rest to you. you can then decide to pay off the loan. interest is the amount of money you pay for taking out a loan. your loan will have an interest rate, a percentage amount. every day that percentage of the loan amount will accrue and will eventually need to be paid back as well as the loan amount. while you are still in school the government pays the interest on a subsidized loan. so if you pay it off before you leave school... or in your grace period... you wont have to pay any interest
2. Wow, quite a few questions. Lets start with the what is a subsidized loan... it is a loan that the government guarantees (so the loan can be resold to investors) and the interest does not accumulate interest (to you) while you are attending school at least half-time. They are typically called Stafford Loans. Once you are approved the loans in essence become a credit line at the college that are used to pay for tuition/books/room & board IF you run out of financial aid (and cash). When you do financial check-in at the school you are required to make arrangements to pay for schooling for the coming semester, at that time you will know whether or not you will need to use the loan or not. Just because you are approved for a loan DOES NOT mean you must use the loan.
3. You can cancel the loan, look at the terms on the promissory note you signed (the contract) for the loan or call your financial aid office. The interest does not start until it goes into repayment which is 6 months after you quit, graduate or fall below half time. If you take it and then decide you dont want it or need all of it, then just take the refund and repay it. All your federal aid will be deposited to your college account on yourcolleges disbursement date, usually there are 2, one before each semester. They will take out their charges for tuition, fees, meals, housing and any left will be refunded to you for books, etc.