I’ve seen a number of articles report that grad students will have to start paying interest while they are still in school after July 1.  I also heard that they are just losing federal subsidy, so they will be forced to take out only unsubsidized loans and private loans, which both gain interest while they are in school…but am I correct in assuming that they are not forced to pay interest while they are in school (even if it would be wise)?

Graduate and professional students are no longer eligible to borrower subsidized Stafford loans to finance their graduate or professional education.  You don’t have to pay the interest on unsubsidized loans while you are in school and in deferment, but if you don’t it gets capitalized, or added to the principal balance, which gets expensive since then you are paying interest on interest.

Graduate and professional students can still borrow the same amount in Stafford loans, but none of the balance will be subsidized.  GradPLUS loans are the best option for financing the rest, and those are federal loans too, not private.  There has never been an interest subsidy on GradPLUS loans.

If you already have subsidized loans from undergraduate school or before July 1, 2012 for grad school, the subsidy will still work the same way and won’t go away.