What is the difference between subsidized and unsubsidized loans?
The government pays the interest on the Federal Subsidized Loan while the student is enrolled in college at least half time. The student is responsible for the interest on the Federal Unsubsidized Loan while in college. The student will receive a bill each quarter (three months) for interest payments only.
“Subsidized” means that the federal government pays the interest on a borrower’s loan, while the student is enrolled at least half-time (6 units) and during grace periods and deferments. Students must demonstrate financial need to qualify for subsidized loans. “Unsubsidized” means that the federal government does not pay the interest on the loan (at any time). Interest is charged on the loan from the date on which it is disbursed until the loan is paid in full. The interest may be paid while the borrower is in school, or the borrower can let the interest accrue (simple interest—the interest is not capitalized during periods of at least half-time enrollment, or deferment). If the borrower chooses to let the interest accrue during periods of enrollment, then any outstanding interest at the time the borrower enters repayment (after the grace period ends) will be capitalized and added back to the principle amount borrowed. The Grad PLUS Loan is another type of unsubsidized loan.
A Subsidized loan is 0% interest while in school An Unsubsidized loan is accruing interest at 6.8%. * Both loans go into repayment 6 months after graduation = 4 && typeof(BSPSPopupOnMouseOver) == ‘function’) BSPSPopupOnMouseOver(event);” class=”BSSCPopup” onclick=”BSSCPopup(‘Office_of_Student_Financial_Aid.
A subsidized loan is awarded on the basis of financial need. You will not be charged any interest before you begin repayment or during authorized periods of deferment. The Federal government subsidizes the interest during these periods. 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 paid in full. If you allow the interest to accumulate, it will be capitalized. You also have the option to make interest-only payments while you attend school.
