What is a subsidized and unsubsidized loan?
A subsidized loan is awarded on the basis of financial need. You will not be charged any interest until your loan goes into repayment. The federal government “subsidizes” the interest while you are enrolled in school in at least 6 credit hours. The interest rate for a subsidized loan in 2008-2009 is fixed at 6.0%, and in 2009-2010 is fixed at 5.6%. An unsubsidized loan is not awarded on the basis of financial need. You will be charged interest from the time the loan is disbursed until it is paid in full. If you allow the interest to accumulate, it will be capitalized; which means the interest will be added to the principal amount of your loan and additional interest will be based upon the higher (capitalized) amount. You do have an option to pay the interest only while you are enrolled in school which will then lessen the amount you will have to repay. The current interest rate for an unsubsidized loan is fixed at 6.8%.
Related Questions
- What if I have exhausted my annual Federal Direct Subsidized/Unsubsidized Loan eligibility and I still have not reached the cost of attendance? How do I secure additional loans?
- What is the main difference between a Subsidized and Unsubsidized Direct Loan?
- What is the difference between a subsidized loan and unsubsidized loan?
