Business Insider: “Understanding student loan interest is vital to managing your debt. Here’s how it works”

Business Insider, Jan 28, 2022 — Marguerita Cheng, CFP® Pro, is featured in today’s Business Insider article by Ryan Wangman, CEPF.

He writes: “When borrowing money for college, some students might tend to focus on their total loan balance and allow the interest to get lost in the fine print. That can be a big mistake. Understanding your loan’s interest rate is a key part of managing debt that you’re probably going to be paying off for at least a decade.”

Ryan turned to Marguerita to learn: When does student loan interest begin accruing?

“Many borrowers may not know that you can pay off the interest while in school and during your six-month grace period to prevent it from capitalizing at the end of that time,” explains Marguerita, a certified financial planner and CEO of Blue Ocean Global Wealth. “Capitalized interest is the unpaid interest added onto your loan balance after periods of nonpayment. This will increase your overall loan balance, and you’ll later pay interest on that higher amount, increasing the total cost of your loan.

“You could pay the interest while you’re in school,” says Marguerita Cheng, a certified financial planner and CEO of Blue Ocean Wealth. “But I’m here to say every situation is unique. What I mean is if you’re an engineering student and your coursework is really hard, maybe it’s okay to not pay the interest and focus on doing well in school. I know sometimes people like absolute advice, and if you can pay the interest, pay it. But every situation is truly unique.”

Click here to read the entire article.