What is the difference between subsidized and unsubsidized Stafford loans?
Subsidized Stafford loans are based on financial need. The government will pay the interest to the lender while you are in school at least half time (6 hours), as well as during the six month grace and any deferment periods. Unsubsidized Stafford loans are a non-need based form of aid. The interest rate on this type of loan is set by the federal government. The borrower is responsible for all interest accrued on the loan. Interest payment can be made while in school or deferred until graduation or when the student drops below half time (6 hours). At the end of the 6 month grace period, the interest will capitalized and be added to the principal of the loan.
The federal government provides two types of Stafford Loans to students to assist them in paying their educational expenses. One type, Subsidized Stafford Loan is a need-based loan determined by the FAFSA. The federal government guarantees this loan and no interest accrues and no payments are made, until after the student completes his/her program. The other type is a Unsubsidized Stafford Loan which is a non-need based loan. Interest does accrue on this loan while the student is enrolled, but no payments are made until after the student completes his/her degree.
