Same Answer Related search query
- Difference between subsidized and unsubsidized loans
- Subsidized student loan
- Subsidized loan interest rate
- Unsubsidized loan interest rate
- Subsidized vs unsubsidized
- Do you have to pay back unsubsidized loans
- Who should you contact if you have trouble making payments once you leave school?
- Which loan type provides interest subsidy meaning department of education
Both subsidized and un-subsidized loans have more things in common than the differences they have. This can make it difficult for a person to differentiate between the two.
Both the loans are a part of the government’s financial aid offering to help students cover their higher educational cost.
The noticeable and important differences and similarities between the two types of loans are mentioned below.
Who qualifies for getting the loan?
In case of subsidized loan, any undergraduate student with financial needs is eligible for obtaining one.
In case of unsubsidized loan, both graduate and undergraduate with or without financial needs is eligible for availing one.
How much can you borrow?
For subsidized loan, it is limited by your dependency status and year in school. And if you reach the limit, you will qualify for unsubsidized loans also on reaching the limit of the unsubsidized loan amount, you would have to find other sources of money such as private student loans.
What is the time limit?
The maximum eligibility period for subsidized loan is 150% of the published length of your program and for unsubsidized loan, there is no time limit.
Whom is the interest paid by?
While you are in school, during grace periods and during deferment periods it is the government who pays the interest for the subsidized loans and for unsubsidized loans, it is you who pays for it.
Answers to the above-mentioned questions can lead you to think that subsidized loan is the winner but you should know the exact reasons behind choosing a subsidized loan whenever you are given the choice.
Subsidized loans save you money –
As mentioned above, the federal government pays for the interest on the subsidized loan during at least half of the time i.e., during the six months grace period after you leave school and during deferments. On the other hands, having an un-subsidized loan will not only cause the interest to pile up each year of college but will also continue to accrue during the grace period at which point it will capitalize.
Subsidized loans are harder to get –
The only way to get a subsidized loan is if your college’s financial aid office determines that you cannot afford to pay the cost of attending that school.
The financial aid office of your college gets the power to determine how much financial aid you are eligible to receive, so on finding any error or if thinking to appeal, you should contact the same.
Similarities between subsidized and un-subsidized loans –
Though there are many differences which subsidized and un-subsidized loans make financially, there are also some similarities between them.
Here they follow –
- Application process –
Whether you are applying for a subsidized or un-subsidized loan,the first thing you need to do is submit the Free Application for Federal Student Aid (FAFSA).
The colleges you apply then will get to decide your financial aid eligibility based on the FAFSA form.
- Enrollment Requirement –
To receive any type of these loans, you would be required to show your enrollment at least half-time in school in a program that leads to a degree or a certificate.
- Loan fees –
Whenever a subsidized or unsubsidized loan is disbursed, a loan fee is deducted from the amount. The fee is calculated as a percentage based on when you took out your loan.
So, going through the above-mentioned points, you must have for, try obtained a clear idea of which loan to opt for based on your situation.
If you are in college and have both subsidized and un-subsidized loans to pay back for, try to start paying off the un-subsidized loan interest first so that you can avoid interest capitalization when you graduate.