Hi! I'm starting to look into financial aid options, and I've come across the term 'subsidized loan' for college. Can someone please explain what that means and how it's different from other types of loans?
Hello! A subsidized loan is a type of federal student loan that offers some significant benefits compared to other types of loans. The primary advantage of a subsidized loan is that the interest on the loan is paid by the federal government while you're enrolled in school at least half-time, during the six-month grace period after you leave school, and during periods of deferment. This can save you a significant amount of money over the life of the loan since the interest won't accrue during those periods.
In contrast, an unsubsidized loan begins accruing interest as soon as the loan is disbursed, even while you're still in school or during grace periods and deferments. That means the amount you'll have to pay back over time will be higher than the initial loan amount, as the interest keeps accumulating.
Subsidized loans are awarded based on financial need, so not everyone qualifies for them. To apply and be considered for a subsidized loan, you'll need to complete the Free Application for Federal Student Aid (FAFSA). The financial aid office at your school will then determine if you're eligible for a subsidized loan and offer it as part of your financial aid package.
It's important to understand the difference between subsidized and unsubsidized loans as you plan for college finances, as the long-term impact on your student loan debt can be significant. Consider prioritizing subsidized loans if you're eligible for them, since they offer more favorable terms and could save you money in the long run.
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