Subsidized Vs. Unsubsidized

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What is the difference between subsidized and unsubsidized student loans?

Subsidized Vs. Unsubsidized

When it comes to paying for college, the federal government offers many funding options including subsidized and unsubsidized college loans.

A subsidized student loan is a federal student loan that the government pays the interest on during certain periods. The U.S. Department of Education will cover all interest that accrues on the loan principal while the student is enrolled in school and meets at least half-time status requirements.

The federal government will also pay all interest during the grace period between graduation and when repayment is set to begin. Interest will only begin to accrue on the principal loan once the loan enters repayment status.

The student is not responsible for any interest during times of federally approved deferment, which is a temporary suspension of repayment.

However, with an unsubsidized loan, interest will accrue beginning immediately upon disbursement of funds. The student is responsible for the original amount of the loan and all interest that accumulates during the life of the loan, as well as during school, grace period and repayment.

In the end, you are more likely to incur larger amounts of student loan debt with unsubsidized federal loans.



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