What is the difference between a Subsidized and an Unsubsidized Stafford?
• Subsidized – Subsidized Stafford loans are for students who show a demonstrated need for financial aid. It’s called a “subsidized” Stafford loan because when a student borrows one, he/she is not charged any interest while still in school or during authorized periods of deferment. The federal government “subsidizes” the interest during these periods. • Unsubsidized – An unsubsidized Stafford Loan is a non need-based loan on which interest is paid by the borrower and not the federal government. Interest on these loans is usually capitalized – that is, the interest that accrues while the student is in school will be added to the principal amount of the loan and additional interest will accrue on the new loan principal. Students have the option of making interest payments while still in school or allowing the interest to accrue and capitalize and making payments after leaving school.
