I am curious because I am looking at student loans and I am wondering what the difference is between these 2 loans so that I can understand which one is right for me.
2006-08-10 14:35:27 · 6 answers · asked by Anonymous in Education & Reference ➔ Financial Aid
To say that a student loan is "subsidized" means that the government is paying the interest on the loan 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).
If your student loan is UNsubsidized, that means that the government will NOT be covering the interest that accrues at any time. So, if you borrow $2,625 Unsubsidized Stafford Loan for your Freshman year, the loan will have accrued interest while you are in school such that, 4 years later when you graduate, the amount you owe will be more like $3,000 (assuming a fixed rate of 6.8%). 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. Check with your school to see which you qualify for.
In short, if you're deciding between a subsidized loan and an unsubsidized loan and the rates are comparable, ALWAYS take the SUBsidized loan.
If you aren't sure whether a loan is Sub or Unsub, ASK. (Perkins Loans are subsidized, too, and carry a fixed rate of 5%. You wouldn't want to miss out on that deal just because you didn't see "sub" in the name, would you?)
2006-08-10 15:44:48 · answer #1 · answered by FinAidGrrl 5 · 2⤊ 0⤋
Subsidized loans have their intrest paid for you while you are in school (+6 months), by the US Government. With unsubidized loan you still won't have to pay until after school, but the loan gains intrest you will be paying.
The choice you have between the loans is offered to you by an evaluation of your FAFSA score. This is also how you will get your Pell Grant money.
If you are offered a choice, ALWAYS take your subsidized loan money over the unsub. It is good to collect your maximum amount each year, and just put the left overs in a bank account earning intrest. That way you have it for emergencies (it doesn't normally carry over year to year), or you can simply give it all back when you graduate and then keep the intrest as your own money.
2006-08-10 15:34:42 · answer #2 · answered by Raxxillion 2 · 0⤊ 0⤋
Subsidized means that it will be interest-free and payment-free until you graduated. Unsub means that payments & interest start right away. Try to avoid unsubsidized at all costs -- it will be hard on you as a student to have to worry about that payment.
Have you looked into the grants first? Keep an eye on your total. Our total was only $15k, but we've been paying on it for 4 years now, and we hate it. I can't imagine having $60k or something -- it would be like a car payment on a REALLY fancy car.
2006-08-10 14:40:56 · answer #3 · answered by wee 2 · 1⤊ 1⤋
Subsidized loans are interest free until you have to pay them back. The government pays the interest on them until you are out of school.
Unsubsidized loans are not interest free and have interest like any other loan. Interest on unsubsidized loans begin when they are given to you.
http://www.csus.edu/sfsc-ymm/03_student_loans/sub_and_unsub.html
2006-08-10 14:43:09 · answer #4 · answered by ? 5 · 0⤊ 0⤋
subsidized=government pays interest while you are in school, you repay loan after you graduate
unsubsidized=you have the option to pay interest while you are in school and you pay the loan after you graduate as well
2006-08-10 14:43:59 · answer #5 · answered by MadameJazzy 4 · 1⤊ 0⤋
interest and no interest
2006-08-10 15:34:36 · answer #6 · answered by juicy 3 · 0⤊ 1⤋