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Unlike subsidized loans, unsubsidized student loans do not require repayment while the student is in school.
However, this does not mean that the student will not incur interest while he or she is in school. In fact, subsidized loans are designed to help students avoid over-accumulating interest during their time in school. When a student graduates, he or she will begin to pay off the loan.
Typically, this means paying off the original amount of the loan as well as any interest accrued while the student was in school. If the student chooses to pay only interest, this can be done by contacting the loan servicer to set up an interest-only payment plan.
Federal student loans
While most federal student loans don’t require repayment while the student is in school, many do require repayment after graduation.
This is because the government pays interest on subsidized loans while the student is in school, and also on subsidized loans during the six-month grace period after graduation.
However, when the student graduates, the government does not pay any interest on unsubsidized loans, and this can add up to thousands of dollars in extra interest over the life of the loan. Therefore, it is important that the student repay the loan as soon as possible to avoid over-accumulating interest. It is also important to remember that subsidized loans are available to any student who needs them, regardless of their financial situation.
Subsidized loans
The amount of subsidized loans a student receives is dependent on the student’s school attendance and other financial aid.
The student must be in school at least half-time in order to qualify for these loans. The school will then calculate how much the student needs to cover the costs of attending school. It will then subtract the Expected Family Contribution, which is the amount the school estimates the student can afford to pay, from the total cost of attendance.
The student’s total subsidized loan amount will not exceed the financial need calculated by the school. The student can also choose to accept work-study awards. If the student chooses to take out an unsubsidized loan, he or she will also pay a disbursement fee, which is typically 1.057% of the total amount of the loan. The disbursement fee will be deducted from the loan when the money is released to the school.
Subsidized student loans are also available to students who have a financial need, but may not be able to prove their financial need with a financial aid application. For this reason, subsidized loans are ideal for students who need help paying for college, but may not have the ability to make payments during the school year. Subsidized loans also help reduce the total cost of the loan, since interest is not added to the principal.
Unsubsidized loans
Unlike subsidized loans, unsubsidized loans do not have a specific application process. Instead, the federal government allows anyone to receive a loan.
This includes graduate students, professional students, and dependent students. The financial need of dependent students is based on the parents’ income.
If the parents’ income is too high for the school to award subsidized loans to their dependent student, the student can apply for an unsubsidized loan. Similarly, graduate students who have a dependent student can apply for an unsubsidized loan.
