What is the difference between a subsidized and unsubsidized loan?
Subsidized: US Dept of Education pays the interest while student is in school and during grace and deferment periods. Unsubsidized: Borrower is responsible for interest during life of the loan. Financial need is not a requirement to get the unsubsidized loan. For both loans, the student must be at least half-time.
Much like the Federal Direct Stafford Loans, two categories of loans exist: • Subsidized loans are awarded based on need. The U.S. Department of Education pays the interest while the student is in school at least half-time. • Unsubsidized loans charge interest from the beginning of the loan until full repayment. Students can either pay the interest as they go or allow the unpaid interest to compound upon the principal.
For the student borrower, the William D. Ford Federal Direct Loan Program is either subsidized, which is need based, or unsubsidized, which is not based on financial need. Both loans have the same fee (2% of the amount borrowed, with an upfront 1.5% fee rebate — maintained if the borrower pays on-time during the first 12 months of repayment), and a 6.8% fixed interest rate, and require that a FAFSA be filed. Both types of loans also have a six-month grace period that begins after the last day of enrollment on at least a half-time basis. You are not required to begin paying back loans until the end of the grace period. Subsidized Direct Loans provide the benefit of not accruing interest until the end of the grace period. Unsubsidized Direct Loans, on the other hand, accrue interest even while the student is in school. You may choose to pay the interest at this point or let it accrue. Although you are not required to pay the accumulating interest while in school, we suggest that you try
A. A subsidized loan is defined as a loan for which a borrower is not responsible for the interest while in an in-school, grace, or deferment status. Subsidized loans at Southern Catholic are Direct Subsidized Loans. Information on the current terms of the loan as well as loan payment calculators can be found here. An unsubsidized loan is defined as a loan for which the borrower is fully responsible for paying the interest regardless of the loan status. Interest on unsubsidized loans accrues from the date of disbursement and continues throughout the life of the loan. Unsubsidized loans at Southern Catholic are Direct Unsubsidized Loans. Information on the current terms of the loan as well as loan payment calculators can be found here.
Subsidized loans are low-interest, need-based loans for students enrolled at least half- time. The Federal government will pay all interest on your loan until you begin repayment which starts six months after you graduate or cease to be enrolled at least half-time. Unsubsidized loans are not based on need. The program is open to all students who do not qualify for other subsidized Federal Stafford loans. You are responsible for all interest from the day the loan is originated.
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?
