Difference Between Subsidized And Unsubsidized Loan – If you are planning to take a loan it is important to know all the options available in the market. One of the important factors that affect the repayment plan is subsidized or Unsubsidized. Before I start comparison let me tell you about both the loans.
- Subsidized Student Loans
According to the financial needs of the student’s the Federal government offers subsidized loans, aid through the FAFSA. One of the best things about the Subsidized loan is that the U.S. Department of Education pays for accrued interest during the period of your school. To get this advantage you must be enrolled at least halftime.
A period of six months is allowed as a grace after completing the graduation. Simply the interest accrues during your college career and six months afterward is completely paid for. After the grace period ends you need to pay a monthly installment of principal and interest.
Remember the subsidized loans are available only to the undergraduate students. If you want to take the advantage of it you need to choose to defer your student loan.
- Unsubsidized Student loan
The loan starts accruing interest from the date of your first loan disbursement. If you don’t want to pay the interest until you finish school, then the amount of money during your education period is added to the principal loan amount and you start paying off the new amount.
One of the best things about this loan is you need not show any financial need so you can take a much higher than a subsidized student loan. Apart from it, Unsubsidized student loans are available for both undergraduate and graduate students.
Difference Between Subsidized And Unsubsidized Loan
If you are an undergraduate student both types of federal loans carry the same fixed interest rate. It is the best option to take a subsidized loan before taking an additional debt like an Unsubsidized loan. If you are planning to go back to school, subsidized loans can save your funds in deferment since interest will not accrue.
If you don’t have a choice because of lack of financial need, your next option will be Unsubsidized and a private loan. As Federal loans have lower interest rates, private loans also offer very low variable interest rates.
In the Subsidized loan, the government sets the interest rates, there is no minimum credit score required for quality and rates are fixed. Although the amount which a student can borrow is limited. A student needs to finish the Free Application for Student Aid to become eligible for Direct Subsidized Loan.
The Direct Unsubsidized loan, federal loans, and the student must complete the FAFSA to be eligible. Eligibility for the Direct Unsubsidized loan is not based on the financial need and students are responsible for interest on Direct Unsubsidized Loans.
The Subsidized loans are for undergraduate students with a financial need which is determined by the cost of attendance less family contribution and other financial aid.
The Unsubsidized Loans are for undergraduate as well as for graduate students they are not based on the financial need. The eligibility is calculated by the cost of attendance less other financial aid. The interest on this loan is charged during in-school, deferment and grace periods. – Difference Between Subsidized And Unsubsidized Loan