Financial Aid Show
The differences between Subsidized and Unsubsidized Loans include the timing of when interest starts accruing, the eligibility for awarding based on financial need, and the maximum amount permitted. In the financial aid packages you received recently, you likely noticed one or two federal student loans. The Federal Direct Student Loan, commonly referred to as the Stafford Loan (its former name) or the William D. Ford Loan (its official name), is awarded to almost every student who submits a FAFSA. It's a loan funded by the federal government, and is included as a part of financial aid because of its low, fixed interest rate and favorable repayment options. The Direct Loan comes in two formats: Subsidized and Unsubsidized. What's the difference between the two? Read on. What are Subsidized Loans?
What are Unsubsidized Loans?
What Do Subsidized and Unsubsidized Loans Have in Common?
You'll need to submit your FAFSA every year to receive your Federal Direct Student Loans, so make sure that's on your radar. And know that you don't need to borrow the full amount of student loans that you receive. You can request that your financial aid office reduce your loan amount anytime. Learn more about federal student loansFederal Direct Subsidized and Unsubsidized LoansFederal Direct Subsidized and Unsubsidized Loans are federally supported, low-interest student loans with flexible repayment options. Subsidized loans are offered to undergraduate students who are eligible on the basis of calculated need, while unsubsidized loans are available to both undergraduate and graduate students even for those who do not qualify for need-based financial aid. All applicants must submit the Free Application for Federal Student Aid (FAFSA) for determination of Federal Direct Subsidized and/or Unsubsidized Loan eligibility. Students must also complete Entrance Counseling and the Master Promissory Note before the initial disbursement of a Direct Loan can be made. helpful linksThe following links provide information on terms and conditions of Federal Direct loans:
We know this is could be one of the most confusing parts of your financial aid offer letter. The Federal Direct Stafford Loan program has two types of loans, Direct Subsidized Loans and Direct Unsubsidized Loans. They are similar, but there are some key differences. Sallie Mae student loans offer competitive fixed and variable rates for undergraduates, graduate students and parents. Learn More About Sallie Mae Subsidized Student LoanThe most common version of a subsidized loan is a Federal Direct Stafford Loan. And you may see this specific loan under many other names on your financial aid offers, or while talking to friends and family. You may hear it referred to as a Stafford Loan, Federal Subsidized Loan, Federal Sub Loan, or just a sub loan. Direct Subsidized loans are for undergraduate students only. The government pays the interest while you are in school and during periods of authorized deferment. This type of loan is awarded if you demonstrate financial need at your college, and there are both annual and cumulative limits you can borrow. Additionally, there could be loans with an interest subsidy offered by your state or school as part of their financial aid offer. Private Student Loan Rates Variable rates starting at: 2.49% APR Fixed rates starting at: 3.75% APR Lowest APRs shown for Private Student Loans are available for the most creditworthy applicants for undergraduate loans, and include a 0.25% interest rate reduction while enrolled in automatic payments. Interest rates as of September 15, 2022. Federal Student Loan Rates For loans first disbursed July 1, 2022 through June 30, 2023 Unsubsidized Student LoanThe Federal Direct Unsubsidized Loan is also part of the Federal Direct Stafford loan program. And just like the Direct Subsidized Loan, you may see it with many different names or abbreviations, like, Stafford Unsub Loan, Federal Unsubsidized loan, Federal Unsub Loan, or just unsub loan. Unsubsidized student loans can be made available to undergraduate and graduate students. You do not have to demonstrate financial need to qualify for an unsubsidized loan, but there are both annual and cumulative limits on how much you may borrow. This loan does not have an interest subsidy where the government pays your interest while you’re in school (are enrolled at least half-time enrollment) and during period of authorized deferment. Federal Student Loan Options: How They CompareFederal Student Loans Comparison
Annual Loan LimitsDirect Stafford Loan Limits
Federal Student Loan Repayment PlansStudent loan borrowers can choose from a variety of repayment plans when it's time to start paying back their loans.
***Federal Parent PLUS borrowers are ineligible for these repayment plans. Private Loan Repayment PlansAs with any consumer transaction, it’s important to learn as much as possible about a loan before deciding to borrow with a specific lender – including the federal government. In short, know your rights and responsibilities and what your loan obligations might be! Always remember that the best loan is the lowest cost loan. See more advice on how to choose the best education loan. Learn More About Federal Student LoansSubsidized Student Loans Unsubsidized Student Loans Undergraduate Student Loans Interest Rates Loan Limits Filing the FAFSA FAFSA Deadlines Financial Aid for Graduate School Which is better a direct subsidized or unsubsidized loan?What's the difference between Direct Subsidized Loans and Direct Unsubsidized Loans? In short, Direct Subsidized Loans have slightly better terms to help out students with financial need.
Do I want to pay subsidized or unsubsidized loans?If you have federal student loans, they may be either subsidized or unsubsidized loans. In this case, it's typically best to focus on your unsubsidized loans first, since they accrue interest during school and during your grace period.
Is subsidized or unsubsidized bad?Subsidized federal student loans are offered with better terms than unsubsidized loans. With subsidized loans, the federal government pays the interest that accrues on the loan while you are in school at least part-time, for the first six months after you graduate, and during periods of deferment.
|