What is the difference between a subsidized and unsubsidized loans?
• An unsubsidized loan starts incurring interest from the moment it is paid out vs a subsidized loan where the federal government pays the interest until 6 months after graduation.
• An unsubsidized loan is available from the federal government and a subsidized loan is a private loan.
• An unsubsidized loan is another description of a private loan.
• A subsidized loan has a special interest rate from the US Department of Labor.
The correct difference between a subsidized and unsubsidized loan is that a subsidized loan is based on financial need, while an unsubsidized loan is not. Here is the correct comparison:
1. Subsidized Loan:
- Awarded based on financial need as determined by the Free Application for Federal Student Aid (FAFSA).
- The federal government pays the interest on the loan while the borrower is in school, during the grace period (usually 6 months after graduation), and during deferment periods.
- This type of loan is only available for undergraduate students.
2. Unsubsidized Loan:
- Not based on financial need, so it is available to all students regardless of income.
- Interest starts accruing from the moment the loan is disbursed, including while the borrower is in school.
- Borrowers have the option to make interest payments while still in school or defer payments until after graduation.
- Both undergraduate and graduate students can qualify for unsubsidized loans.
Both subsidized and unsubsidized loans are offered by the federal government through the Department of Education. They are not private loans or associated with the US Department of Labor.