The difference between subsidized loan and a unsubsidized loan?

Question

Any help would be appreciated. Thank-you!

Answer 1

In the case of student loans, to say that a loan is "subsidized" means that someone is paying the interest on the loan during a given period of time. With Federal Stafford and Perkins loans, the government subsidizes this interest.

NOTE: It should be emphasized that a Subsidized Stafford Loan is only really subsidized *while you are in school* and during any periods of deferment/grace (i.e. if you apply for and are approved for an Economic Hardship Deferment once you enter repayment, your loan won't accrue interest during the deferment period). ANy other time, it will accrue interest which you must pay off.

If your loan is UNsubsidized, that means that the government does NOT cover the accruing interest at any time.

For example, if you borrow a $2,500 Unsub loan during your Freshman year, the loan will have accrued interest while you are in school such that, by the time you graduate, the amount you owe will be more like $2,750 (assuming the current Stafford interest rate of 4.7% -- though Stafford rates will be fixed at 6.8% beginning this July 1st). Interest really adds up -- but that's true of any loan.

When you file the FAFSA to apply for federal aid, you will be applying for a generic Stafford loan. Whether that loan will be subsidized or unsubsidized is something your school will determine. Generally you can only receive a Subsidized Stafford loan if you show financial need. If you don't show need, your Stafford loan will be Unsubsidized. [There are some ways that a student can get both the full amount of their Sub and additional Unsub, but this generally involves being independent or being a dependent student whose parents have been denied a PLUS loan.] Check with your school to see which you qualify for. Stafford loans involve no credit check, so there's no harm in applying, see what you are offered, and then deciding if you wish to borrow.

Note: you don't have to begin repaying your Staffords until 6 months after you graduate -- and this is true whether the loan is Sub or Unsub. The standard repayment term for these loans is 10 years. I don't know where the person above me got the idea that you have only 6 months to pay off your Sub!!

Answer 2

Subsidized Stafford Loan Program is a federally-supported loan made by commercial banks available to students who demonstrate financial need. Payment begins at a minimum of $50 per month six months after graduation. Generally, there is a max of 10 years to repay.

Unsubsidized Stafford Student Loan Program is available for students who do NOT demonstrate financial need. While the terms of the loan are similar to the subsidized loan, inerest accrual is immediate.

Questions about the student's eligibility should be answered by the Financial Aid Office of the college the student is attending.

Answer 3

Both are Stafford Loans. You can have a Stafford Loan that is part Subsidized and part Unsubsidized. The Subsidized portion of the loan is "subsidized" by the Department of Education (DOE). While you are in school plus 6 months after leaving school the DOE pays the interest for you, to the lender. The Unsubsidized portion, you are responsible for the interest. You can either let it accrue (add on to your loan balance) or pay the interest to the lender on a quarterly basis. If you let it accrue, when you enter repayment 6 months after leaving school, you will owe more on the loan than what you borrowed.

Answer 4

A subsidized loan has the interest subsidized by the government. An unsubsidized loan doesn't, so you will have to pay more in repayment. Try to get as much in subsidized loans as you can. You will save a lot of money in interest.

Answer 5

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 (see below). The federal government "subsidizes" the interest during these periods.

An unsubsidized loan is not awarded on the basis of need. You'll be charged interest from the time the loan is disbursed until it is paid in full.

Answer 6

The major difference between subsidised loan and a unsubsidized loan is that, in a subsidised loan some percentage of rate of interest (reduced or discounted rate of interest) is implied on the principle amount which is provided by the Government/ autonomous bodies on the basis of activities any organisation/individual is providing services to the society.

On the other hand, unsubsidized loan is normal loan which puts standard rate of interest through general rules provided by Government/autonomous bodies.

As a matter of fact, subsidy is a provision that holds special characteristics on the basis of different facts like: In agriculture sector, if crops get destroyed due to natural calamity, then subsidised loan on agriculture can be reduced/free after decision taken by Government agencies.

Answer 7

Subsidized loans have to be paid back within 6 months. Unsubsidized loans have to be paid back 6 months after you graduate from college, or if you are out of school for one semister.

Answer 8

With subsidized student loans, the government pays the interest while you're in school, so you don't have to worry about paying it off or any of that stuff until you're out of school and have a job.

If you're unsubsidized, you're on your own.

Answer 9

One accurs interest while the other starts interest after you graduate. Im unsure which is which.. sorry