For anyone who's made subsidized student loan payments during the GRACE period...

[1babysmom]

...did they apply your payments to the principle or to the loan? Our grace period JUST began (DH graduated a few weeks ago) and so we have until July for our the interest/payments to begin on our Fed. Sub. Direct Loan, and September for our Perkins loans. I have been trying to figure out how they apply any payments I make during this time (we want to get in the habit of paying now, and we were given a fair amount for Christmas to apply towards the loans)- if they automatically go to principle, if I have to specify where they go, or if they just go towards interest first, period. Everywhere I've called just gives me the go around and no one has any real answers. The closest I got to an answer was one lady about the Direct Loan who said even during the grace period, it'll go towards interest first. Is that right? Because I am not even accruing interest until July, and with subsidized loans the government "pays" the interest during the grace period, so why would it be applied to interest I haven't even accrued yet?

Any help understanding this would be much appreciated!!

update- Well I just checked the Perkins loan and the one "trial" payment I made has posted and lowered my loan balance by the payment amount, so I'm assuming that one just applies to principle! Good...we may easily be able to pay that one off BEFORE the grace period is up as it's fairly small.

The Stafford loan hasn't posted the payment yet so I'll have to wait and see what it does.

[mnnice]

My subsidized loans were interest free during the grace period so any money paid to them had to be principle. I suspect that if you are paying interest they may required you to pay the interest first before paying any principle. Either way it sounds like a smart move.

[1babysmom]

Originally Posted by mnnice

My subsidized loans were interest free during the grace period so any money paid to them had to be principle. I suspect that if you are paying interest they may required you to pay the interest first before paying any principle. Either way it sounds like a smart move.

These are subsidized so they are interest free (to me) during the grace period, as well.

[bluebunny]

Maybe I'm missing something but wouldn't you be better off putting the money in an interest-bearing savings account until July? That way, you are making money off your money rather than losing the opportunity. Why pay now when you are not accruing interest?
I understand the sentiment of getting in the habit of paying but you would be losing money doing that.

[1babysmom]

Originally Posted by bluebunny

Maybe I'm missing something but wouldn't you be better off putting the money in an interest-bearing savings account until July? That way, you are making money off your money rather than losing the opportunity. Why pay now when you are not accruing interest?
I understand the sentiment of getting in the habit of paying but you would be losing money doing that.

We are keeping the money in an interest savings account, but we have already decided that we will make payments FROM this account whenever possible during this grace period, because we want to lower the principle as much as we can before the interest starts accruing. The interest will will earn in our savings is not enough to just let it sit and pay off one lump sum right before July (and we don't want to deal with setting up another account right now), so we have chosen to get into the habit. Our income is VERY small so getting used to payments like this is pretty important for us.

[1babysmom]

Well I just checked the Perkins loan and the payment has posted and lowered my loan balance by the payment amount, so I'm assuming that one just applies to principle! Good...we may easily be able to pay that one off BEFORE the grace period is up as it's fairly small, and avoid dealing with interest all together!

The Stafford loan hasn't posted the payment yet so I'll have to wait and see what it does.

[cristeen]

My student loan companies apply it to the future interest unless you specifically instruct them to apply it to the principal. And those instructions have to come with every payment - you can't just mark your account that that's what you want. It's a big pain.