What is the difference between a subsidized and unsubsidized Stafford Loan?
A Stafford Loan is a government-guaranteed loan available to students. There are two types of Stafford loans; subsidized and unsubsidized. With a subsidized Stafford, the government pays the interest while you’re in school. With an unsubsidized Stafford, you are responsible for the interest while you are in school. You can either elect to pay the interest while you are in school or defer it until after graduation. You should note that if you defer the interest, it will be capitalized upon graduation and will raise the overall cost of your loan.
The Stafford loan comes in two forms: subsidized and unsubsidized. If the loan is going towards meeting federally-demonstrated need, then the Stafford Loan will be offered in a subsidized form. This means that the federal government will pay the interest that accrues on the loan while the student is in college or in deferment. If, on the other hand, the student’s federally-demonstrated need has already been met through other sources, then the student may still elect to borrow through the Stafford Loan Program, but the loan will be in an unsubsidized form. This means that the student will be responsible for paying the interest that accrues on the loan while in college or in deferment. All other features of the two loans (such as interest rate, amounts one can borrow, repayment schedule) are identical. Please see more detailed information on the Stafford Loan Program.
The main difference is who is responsible for the interest that accumulates on the Stafford Loan: Subsidized Stafford -The federal government is responsible for the interest that accumulates while you are in college at least halftime. Unsubsidized Stafford – you are responsible for the interest that accumulates while you are in college.
• A subsidized loan is a need-based loan that is interest free while you are attending college at least six hours. An unsubsidized loan is not need based and is not interest free while you are attending college. But you have the option of letting your interest accumulate while you attend college. For more information please go to Federal Direct Loans.
Both of these loans are federal loans and are only awarded to students who meet the federal requirements. The subsidized loan is a need-based loan that the federal government pays the interest on while the student is enrolled at least half-time in an eligible degree program. The unsubsidized loan is not need-based and it begins to accrue interest when the loan is disbursed. A dependent student cannot get an additional unsubsidized loan unless the parent PLUS loan is denied by the lender. All federally eligible students qualify for student loans — whether they will get a “sub” or an “unsub” depends on their financial need. Both of these loans go into repayment six months after graduation, after a student drops to below half-time status, or after the student withdraws from an academic program. Year in School Loan Amount Additional if PLUS denied Total Amount Freshmen $5,500 $4,000 $9,500 Sophomore $6,500 $4,000 $10,500 Junior $7,500 $5,000 $12,500 Senior $7,500 $5,000 $7,500 All independ
