What is the difference between subsidized and unsubsidized loans?
Stafford loans are available at excellent rates. Depending on your financial need, you may be qualified to receive a subsidized loan. Subsidized Stafford loans are need based and interest free while you are in school. Unsubsidized Stafford loans are non-need based and interest bearing loans. Interest accrues while you are in school. You may opt to pay the interest while in school. Alternatively, you may forego interest payments until repayment begins, however all accrued interest will be capitalized at repayment. You have a “grace period” of 6 months to begin repayment after you graduate, withdraw, or drop below half-time enrollment level. You have 10 years to repay your loans and the interest rate is capped at 8.25%.
The major difference between subsidized and unsubsidized loans involves the payment of interest. With a subsidized loan, someone other than the borrower is responsible for paying the interest on the loan. When a loan is unsubsidized, the borrower must pay interest on the loan, beginning at the time of disbursement. Often, the differences between subsidized and unsubsidized loans come into play when student loans are involved. When a student acquires a subsidized student loan, another party takes care of the interest. Typically, the entity paying the interest on a subsidized student loan is the federal government. In such cases, the federal government picks up the tab for the student’s loan interest while he or she is enrolled in school. The government also pays the interest on subsidized loans while students are within allowed grace periods and when loans are in deferment. It is important to note that subsidized loans do not provide complete freedom from paying interest. Once a student
The major difference between subsidized and unsubsidized loans involves the payment of interest. With a subsidized loan, someone other than the borrower is responsible for paying the interest on the loan. When a loan is unsubsidized, the borrower must pay interest on the loan, beginning at the time of disbursement. Often, the differences between subsidized and unsubsidized loans come into play when student loans are involved. When a student acquires a subsidized student loan, another party takes care of the interest. Typically, the entity paying the interest on a subsidized student loan is the federal government. In such cases, the federal government picks up the tab for the students loan interest while he or she is enrolled in school. The government also pays the interest on subsidized loans while students are within allowed grace periods and when loans are in deferment. It is important to note that subsidized loans do not provide complete freedom from paying interest. Once a student
Eligibility for the subsidized Stafford Loan is based on need. The government pays the interest on these loans while students are in school at least half time and during the six-month grace period before repayment begins. Eligibility for the unsubsidized Stafford Loan is not based on need. The federal government does not pay the interest during school attendance or during the six-month grace period. Students may pay the interest while they are completing their program or allow it to accumulate and be added to the outstanding principal, thereby increasing the amount to be repaid.
