Student Loans-What are Subsidized and Unsubsidized Student Loans?

March 28, 2009 by  
Filed under Student Loans

Getting a student loan may sometimes be just as hard as playing the stock market. There may be hundreds of potential scholarships, student loan programs and other types of financial assistance for students available today, but for the majority of students, federal student loan programs are the best source of financial aid to opt for.

Most of the money given out in student loans stems from one out of six student loan programs; Stafford student loan for students and PLUS for parents are in charge of most cases. Aside from the names of these student loan programs, there are two other categories that student loan seekers should know about. Also, know that there will be different important financial impacts down each path, depending on the student loan of your choice.

The two categories of student loans are subsidized student loans and unsubsidized student loans. Payments are usually never paid until half a year after leaving school, regardless of whether graduation occurred or not. However, since interest is accumulated based on the amount of the student loan, it may add up to become quite a huge sum after several years.

Subsidized student loans are a kind of student loan where the government pays the entirety of the interest accumulated on the student loan through the years. While the student is in school, neither the student nor the parents will accumulate interest with subsidized student loans. Interest will only add up six months after the student leaves.

Unsubsidized student loans are the opposite of this. Although students can make payments while in school or afterwards, the interest is accumulated the minute the student loan has been funded. Even at a modest amount of $1,000, paying an additional 6% interest per year could add up to $60 in one year. This may not sound like much, but if it is left unpaid, it will be.

Plus, the example given is a very simple one. Interest is actually calculated per month, not per year, so the amount tends to grow incredibly fast. Even the interest amounts are incredibly large, since student loan amounts are usually 20 times more than the example given. A student loan calculator can put things in better perspective for you, if you really want to know the details.

A lot of student loans actually fuse together subsidized and unsubsidized students loans, and funds may be taken from a Stafford student loan and a PLUS loan at the same time; a lot of different options abide. Also, bear in mind that some students may not have the qualifications to get particular federal student loans due to the family’s overall income, amongst other reasons. In such cases, private student loans or other sources of funds will have to be looked at.

The best way to find out is by filling out a standard Free Application for Federal Student Aid (FAFSA) application today, which you can find here:

By sending in an application along with other documents required, such as the family’s overall income, credit histories, current debt loans, etc. – student loan officers will decide whether you quality for a student loan or not.

Students tend to quality for at least some sort of financial aid, in most cases.