What’s the difference between subsidized and unsubsidized Stafford Loans?
It’s all about financial need. Subsidized Stafford Loans are awarded to students with demonstrated financial need. While students are in school, Uncle Sam pays the interest on subsidized Stafford Loans, and payment is deferred (delayed) until after graduation. Once out of school, though, the student assumes responsibility for the loan, including interest. With an unsubsidized Stafford Loan, you’re responsible for the interest from the time funds are disbursed. This loan is not based on financial need; in fact, virtually every student is eligible for an unsubsidized Stafford Loan. Although interest starts to accrue immediately, you can delay repayment until after graduation.
Subsidized and Unsubsidized Stafford loans have the same interest rate and begin accruing interest when the loan is disbursed. The difference is that the government pays off the interest that accrues on Subsidized Stafford loans while you are in school, grace period, or deferment. You are responsible, however, for the interest that accrues on Unsubsidized Stafford loans from day one. Students do not have to pay off this interest as it accrues; most pay it off with their principle debt when they graduate.
