What is Subsidized Loan?
The disburser of a subsidized loan allows the borrower to defer paying interest payments on the borrowed sum during the deferment period. The grace period that follows the deferment period also brings relief to the borrower who can further postpone repayment. These deferments are made possible since the disburser, generally the govt. or a charitable organization, agrees to pay interest on the principal during the deferment and the grace period. Once the aforementioned periods elapse, the borrower starts paying interest on the principal and repays the borrowed sum. What is Unsubsidized Loan? Procuring an unsubsidized loan results in the borrower having to pay interest and principal on the borrowed sum from the time the loan is disbursed till the date of maturity. In some cases, the borrower may be allowed to defer interest payments. However the interest, that is deferred, accrues interest and the borrower becomes liable for a greater sum. Hence, it is never advisable to defer repayments
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?
- Must a school determine a students eligibility for a subsidized Federal Stafford Loan before determining a parent borrowers eligibility for a Federal PLUS Loan?
- What is the difference between a subsidized loan and unsubsidized loan?
