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What is the difference between a subsidized and an unsubsidized Stafford Loan?

April 26, 2017loan Stafford Subsidized Unsubsidized

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What is the difference between a subsidized and an unsubsidized Stafford Loan?

5 Answers

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• A Subsidized Federal Stafford Loan is a loan in which the interest due on the loan is paid by the Federal Government while you are in school, during your 6-month grace period following cessation of at least half-time enrollment, and for any periods of authorized deferment after you begin repayment. • An Unsubsidized Federal Stafford Loan has all the same terms as the subsidized Federal Stafford loan including deferments, interest rates and loan limits.

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The federal government pays the interest on a Subsidized Stafford Loan while the student is enrolled in school on at least a half-time basis. If you receive an Unsubsidized Stafford Loan, the federal government does not pay the interest on the loan. With the Unsubsidized Stafford Loan, the student can choose to pay the interest or permit it to capitalize, meaning that earned interest is added to the principle of the loan.

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The federal government pays the interest on a Subsidized Stafford Loan while the student is enrolled in school at least a half-time (6 credit hours/term for bachelor’s and master’s; 3 credit hours/term for doctoral students). If you receive an Unsubsidized Stafford Loan, the federal government does not pay the interest on the loan and the interest will accrue over the course of the loan. You may choose to pay the interest or permit it to capitalize, meaning that earned interest is added to the principle of the loan.

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A subsidized loan is awarded on the basis of financial need . You will not be charged any interest while you are enrolled in school at least half time, during a grace period, or during authorized periods of deferment. An unsubsidized loan is not awarded on the basis of need. You will be charged interest from the time the loan is disbursed until it is paid in full. You can receive a subsidized loan and an unsubsidized loan for the same enrollment period.

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As its name implies, a subsidized loan is one where the government pays the interest on the loan while the student is in school. An unsubsidized loan is one where the government does not pay the interest while the student is in school.