What's the difference between a federal subsidized stafford loan and a federal unsubsidized stafford loan? And which, in your opinion, is the better option of the two?
2007-07-22 04:21:24 · 5 answers · asked by rudepplsuck 2 in Education & Reference ➔ Financial Aid
i work for a loan company the difference in the two is that a subsidized loan is given out based on your financial need. you wont be charged interest during your deferment. a unsubsidized loan is those where the interest starts to accrue as soon as you receive the money. if you allow the interest to accumulate that means it will be capitalized. that means that the interest is added on to your original or principal amount and then additional interest will be added on to that until it is paid off. in my opinion the subsidized is better because there is no interest added on while your in school. but if you can not get the subsidized loan at least try to to pay the interest while you are in school to end up paying less money back. If you were to borrow 10,000 dollars and it is a unsubsidized loan and you do not start paying it until you are finish with school. you will end up paying back around 30,000 dollars.
2007-07-22 04:35:26 · answer #1 · answered by ashlggurl 2 · 2⤊ 0⤋
Subsidized loans are loans for which a borrower is not responsible for the interest while in an in-school, grace, or deferment status. Subsidized loans include Direct Subsidized, Direct Subsidized Consolidation Loans, Federal Subsidized Stafford Loans and Federal Subsidized Consolidation Loans. Unsubsidized loans are loans for which the borrower is fully responsible for paying the interest regardless of the loan status. Interest on unsubsidized loans accrues from the date of disbursement and continues throughout the life of the loan. Unsubsidized loans include: Direct Unsubsidized Loans, Direct PLUS Loans, Direct Unsubsidized Consolidation Loans, and Federal Unsubsidized Stafford Loans, Federal PLUS Loans, and Federal Unsubsidized Consolidation Loans. So, subsidized loans ultimately cost less.
2016-04-01 07:03:23 · answer #2 · answered by ? 4 · 0⤊ 0⤋
One accumulates interest while the other does not. For example, let's assume you have an unsubsidized stafford loan for $5,000 and a subsidized one also for $5,000. After graduation, one loan (I'm not sure which) will still be repayable at $5,000. The one that accumulated interest, however, will be higher (depending on the current interest rate). It is certainly recommended that you use the interest-free loan before having to rely on the other one.
2007-07-22 10:10:49 · answer #3 · answered by Joe G 1 · 1⤊ 1⤋
subsidized means the government will pay the interest accrued while you are in school. unsubsidized means you will accrue interest while in school, which will be added on top of your principle. you will pay less for the same loan by taking out a subsidized loan. you have a cap on what you are eligible to take out by your grade level. you may end up having both types of loans. if you cannot afford to pay any differences there may be between your tuition and your sub loan, you would still be able to take out unsub loan to cover it. hope that helps.
2007-07-22 15:49:27 · answer #4 · answered by ciessa1203 3 · 1⤊ 0⤋
Actually - they both are accruing interest, but the subsidized loan interest is paid by the Federal Government; the interest from the unsubsidized loan accrues and no one is paying it until your deferment period is over. Obviously, the unsubsidized is the better option, but you have to qualify for it. Qualifying is based on financial need.
2007-07-22 13:20:28 · answer #5 · answered by LaLa 3 · 1⤊ 3⤋
LALA is incorrect the others above are correct. The best order is sub stafford, unsub stafford, PLUS, then alternative (if you go this route).
2007-07-24 15:55:56 · answer #6 · answered by John 3 · 0⤊ 0⤋