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Each year, thousands of undergraduate and graduate students rely on student loans to afford college expenses. Whether it be from the federal government or a private lender, student loans are borrowed money that is expected to be paid back with interest.
The trade-off between receiving this money urgently is having to pay it back in a larger monetary value over time.
Student loans accumulate interest as soon as the money is deposited into your bank account. However, each loan servicer differs in how these interest payments are given to student loan borrowers.
It is always beneficial to know how your specific student loan interest work to prepare ahead and ensure that loan payments are manageable.
Federal student loans
Direct subsidized loans
This type of student loan is a type of federal loan, which only undergraduate students can apply for using the Free application for federal student aid (FAFSA). Your respective school will often use the application to give you your financial aid offer which includes a calculation in this loan.