March 22, 2007

Subsidized Loans Vs. Unsubsidized Loans

Posted in FAFSA, Graduate Students, Misc, Saving for College, Stafford Loans, The Financial Aid Process at 8:34 AM by kpops


As you now already now, Stafford Loans are Federal Aid awarded to students based on financial need. These are loans and not grants so they do need to be repayed to your lender, which of course means they accrue interest. What most students dont know is that there are two types of Stafford Loans, Unsubsidized Loans and Subsidized Loans. Subsidized Loans are awarded to the students with a greater financial need for the loan. The government pays interest on these loans while the student is in school. This means that the student does not begin accruing any interest on the loans until 6 months after graduation.

Unsubsidized Stafford Loans begin accruing interest from the date the loan is disbursed to the school. Although repayment of Stafford Loans is deferred until the student graduates from school you do still have an option of making interest only payments while in school. This arrangement can be made directly with your lender in order to save on interest paid over the long run. If you chose to defer your interest until you graduate the interest will be capitalized. This means that the interest will be added to the principal balance of the loan and you will then continue to accrue interest on the total balance.

The Student Loan Network: Stafford Federal Student
Loans
, Parent PLUS Loans, Student Loan
Consolidation
, Private Student Loans

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15 Comments »

  1. Karen Looper said,

    Does the interest rate change on a unsubsidized loan over the coarse of time or does it stay the same?

  2. Houston said,

    Worn by Daniel Craig in Casino Royale in 2006 (Omega Seamaster Planet Ocean 2900.
    s economic structure adversely. And they will start showing it off to everyone you
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  3. Tim Brown said,

    What if I accepted both Unsubsidized & subsidized loan after the date of the which they sent the refund checks out, but first time borrowers must wait an additional 30days, the 30 days have not reaches yet, so what will be my outcome??

  4. Wayne said,

    I have two students in different years at different colleges. Other than the obvious and the school information, their FASFA applications were identical. One received a subsidized loan while the other a unsubsidized loan.

    Before I call, does anyone have any explanations for this?

  5. krivers said,

    Certainly an article to be read! This was a great and informative read! Fabulous work by the author and creator! I must admit the author had some very valid points here. Thank you for taking the time to share this with us!

  6. if the school closes before paying student loan should you be obligated to pay it off if you didnt get to graduate

  7. Kind Regard said,

    this information very nice.we specialize in providing a full bookkeeping service to client. Bookkeeping is our business.

  8. RIck Roudebush said,

    If I wanted to pay the monthly interest on a $2,000 unsubsidized Stafford loan @ 6.8% while my child is in college, how would I calculate the mointhly interest I would pay?
    Thank you.

  9. RIck Roudebush said,

    What happens after we send in the promissory note to the bank we have chosen to apply for a Stafford loans?
    Thank you.

  10. As I have Stafford subsidized loan experience I’ll speak for it. I graduated from college 4 years ago and I’m in the middle of paying off my loan. Those having no other option before them check this one out. That’s very helpful and unlike unsubsidised one it leaves you alone with your studies and only afterwards reminds of itself.

  11. Kathy Brumfield said,

    My daughter is 18 and will begin Univ Of Arkansas in Fall 09- this Fall — she got word that she received 5500dollars in Stanford unsub loans for 09-10 yr — where and who do I see to get this thing called “Parentplus “loans — the university?/ their finance dept — How is a ParentPlus loan different from just walking into Bank Of America and asking for a college loan — I sure need help with this — plan to sell the house to downsize my indebtedness but that may not be soon enough .. tuition is $15,000 a yr so my part is 10,000 oh my –please repsond — and THANKS!
    Kathy B in Missouri

    • Kathy – this web page will answer nearly every question you have:
      http://www.parentplusloan.com/plus-loans

      PLUS loans are federally guaranteed loans which you can get from many banks or from the government directly. Walking into Bank of America and asking for a “college loan”…well, I’d be careful about that. Banks make more money on a Private loan, which is a much worse loan for the borrower. Always maximize your federal student aid before getting private loans

  12. twyla royston said,

    i want to say thank you for this site. it really helped me with all questions that i needed to be answered!!!

  13. For many students, student credits are sought at the start of their college career. Most students do work in a part-time job; however, this is not always enough to cover the many expenses of college. With student credits, the student can keep their attention on things such as studies and classes, without having to worry about many expenses. The great thing about student credits is that for the entire time you are in college full-time, the loan will not need to be repaid until you have finished college for good and graduated in your degree.


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