The Myth of the Subsidized Private Student Loan

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Is there such a thing as subsidized private student loans?

The Myth of the Subsidized Private Student Loan

There are many frequently asked questions when it comes to applying for student loans. There is a lot of ground to cover on the subject of education expenses and there are many confusing areas that can trip people up. One of those areas being subsidized and unsubsidized loans.

So to answer the question that so many people ask, here it is. There is no such thing as a subsidized private student loan. All lenders of private student loans place the responsibility for interest accumulated on the account on the shoulders of the borrower. Just like a federal unsubsidized student loan, private student loans begin accruing interest upon the first disbursement.

There is only one loan available today that is privately funded and can be subsidized. This is the Stafford Loan through the Federal Family Education Loan Program (FFELP). The reason why this loan can be subsidized is because, while the money is from a private source, the loan itself is federally guaranteed by the U.S. Department of Education.

So when you apply for financial aid, make sure to load up on the subsidized loans. Because every other kind of loan will start building interest sooner and place that responsibility on you.



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