What is the difference between a subsidized and unsubsidized loan?
A6)—A Subsidized Loan is available to students who have financial need based upon the EFC on your FAFSA. While a student is enrolled at least half-time (six credit hours or more) the federal government pays the interest on this loan on the student’s behalf. This interest payment also occurs during the six-month grace period. An Unsubsidized Loan is available to students to assist with educational expenses. This federal loan is not based upon financial need and therefore all students are eligible to apply. Students are responsible for paying the interest on an Unsubsidized Loan. While enrolled, students have the option to pay the quarterly accrued interest. If you choose not to pay the quarterly interest, the outstanding interest will be added on to the principal balance.
A subsidized loan is based on financial need. On a subsidized loan interest is paid on your behalf by the government while you are enrolled at least half-time and during grace or deferment periods. An unsubsidized loan is not based on financial need. On this loan interest accrues within sixty days of disbursement and can be paid while you are in school, or deferred until you begin repayment. Interest is capitalized and added to the principal amount outstanding, if you choose the deferred option.
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