Subsidized Loan Vs. Unsubsidized Loan
When it comes to higher education a major consideration for many will be how will they finance it. The Federal Government offers subsidized and unsubsidized loans to students that are eligible in participating schools. So what is the difference between a subsidized loan and an unsubsidized loan?
Subsidized loans are provided by the Department of Education to students that are in financial need based on criteria.
Subsidized Loan Features
The interest on the loan is covered by the government whilst:
- You are at school for at least half of the year
- For the first 6 months after you finish school
- During the deferment period when conditions are met to delay repayment.
The school that you are attending will determine the amount that you need to borrow.
The eligibility is limited to 150% of the time it would normally take to complete your program.
These are provided by the Department of Education to students. There is no requirement for the students to show a financial need.
Unsubsidized Loan Features
- The student will need to pay the interest for the life of the loan even when they are in school.
- If the student decides not to pay interest whilst in school or during the grace period the interest is added to the total of the loan.
- The amount that you can borrow is determined by your school.
These loans are still useful for students that require extra funds for education but do not meet the requirements of financial need.
Common Traits in Both Loans
The difference with these loans is who pays the interest in school and after. The terms of the loans are comparable.
- There is a limit on the total value of the loans and are updated by the Department of Education.
- All loans have prescribed interest rates
- Loan fees are applied to both loans and are deducted from the cash you receive.