Subsidized Student Loans versus Unsubsidized: The Difference

Are you getting subsidized student loans, or unsubsidized? Setting up financial aid can be quite a chore. Your university studies will go a little easier if you understand the difference.

You may think that all student loans are the same. Many students don't realize that a student loan approved through the federal program has benefits that a private loan won't have.



Federal versus Private

Student loans that come from the federal program can be subsidized. This means that the government program will partly pay the interest on your loan.

While you go to college, it will pay all of the interest. And as I'll explain below, at other times during the loan, you may also get a free ride.

Private student loans won't have this feature. You will pay a higher interest rate due to this difference. It won't seem like much on paper, but a couple of percent will add up to quite a bit over the term of the loan. Any time a private lender does defer payments, you'll have to make up the interest on the end of the loan.

Also, a government loan will allow you to defer your loan during difficult times. Private loans may offer this feature. You'll have to check on this when you apply.

Once when I lost a job, I was looking for every way I could to reduce my expenses. I deferred my student loans for a while. It was a great help.

Later, when I went back to grad school, my subsidized student loans had a feature that they deferred until I finished. Also a big help.



Another Difference: Subsidized versus Unsubsidized

In some cases, you can qualify for unsubsidized student loans. These loans will have a slightly higher interest rate than the subsidized loans, but not as high as a private loan.

Also, you can defer a Stafford loan, but you'll have to pay all the interest.

If you have your Student Aid Report, or SAR, and you have access to subsidized student loans, that should be your first choice after grants and scholarships.

In addition, an unsubsidized Stafford student loan may help you, if you really need the money.

Generally, stay away from debt when you can. Work during the summer, and part time during college. Keep your expenses low and avoid any loans you don't really need.

One more thing

Some schools charge very high tuition. They offer great educations to be sure, but if you don't have the money you should consider going to another school.

Yes, with enough student loans, you can get through even at the most expensive universities. But if you have that debt forever, you may still regret it.

Some degrees will earn enough to pay off those loans quickly. Great! Check into your future earnings before you bury yourself in debt to go to school.

And if you have the choice, choose the subsidized student loans. These cost less and won't take as long to pay off.





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