Stafford loans are insured by the federal government. These fees are a part of the amount you repay. The federal government pays the interest on this loan while you are in school at least half-time and during the grace or deferment periods. After you graduate, drop below half-time, or withdraw from school, there is a six month grace period before your monthly payments begin. Once repayment begins, interest accrues, and you are responsible for payment on the amount you borrowed the principal as well as on the interest.
Interest accrues immediately after disbursement.
Unless you make interest payments while you are in school, interest will continue to accrue and will be added to the loan principal. This is called capitalization. Capitalization dramatically increases the amount of your loan and the total amount you have to repay. Ultimately you will be paying interest on interest, and the total amount you owe will increase along with your monthly payment. If you borrow unsubsidized funds, we strongly recommend that you make interest payments while you are in school.