Federal loans come in two types: subsidized and unsubsidized. The main difference between the two is who pays the interest on the loan while you are in school. For a subsidized loan, the government pays the interest for you. For an unsubsidized loan, you are responsible for paying the interest from the beginning. This blog post will discuss the differences between subsidized and unsubsidized federal loans, so you can decide which one is best for you.
What is a Subsidized Federal Loan?
A subsidized federal loan is a need-based loan. In order to qualify, you must demonstrate financial need. The government will then pay the interest on your loan while you are in school. This can save you a lot of money, as interest can accrue quickly on a student loan. Subsidized loans are available for both undergraduate and graduate students.
What is Unsubsidized Federal Loan?
An unsubsidized federal loan is not need-based. Anyone can qualify for an unsubsidized loan, regardless of their financial situation. However, you will be responsible for paying the interest on your loan from the time it is disbursed. This means that the amount you owe on your loan will grow over time, as interest accrues. Unsubsidized loans are available for both undergraduate and graduate students.
Difference between Subsidized and Unsubsidized Federal Loans
The main difference between subsidized and unsubsidized federal loans is who pays the interest. With a subsidized loan, the government pays the interest for you. With an unsubsidized loan, you are responsible for paying the interest from the beginning. This can make a big difference in how much you end up owing on your loan.
Another difference between these two types of loans is that subsidized loans are need-based, while unsubsidized loans are not. This means that you must demonstrate financial need in order to qualify for a subsidized loan. Anyone can qualify for an unsubsidized loan, regardless of their financial situation.
Conclusion
Subsidized and unsubsidized loans are both federal student loans available to college students. The main difference between the two is that with a subsidized loan, the government pays the interest while you are in school and during your grace period. With an unsubsidized loan, you are responsible for all the interest from day one. Both types of loans have fixed interest rates and offer flexible repayment options. If you’re not sure which type of loan is right for you, speak to a financial aid advisor at your school or contact us for more information.
