Subsidized or Unsubsidized Loans, What’s the Difference? If you’re just jumping back into the college scene, then there have likely been a few things you’ve forgotten or that have been updated in regards to your student loans. This post will just go through the basics between a subsidized and unsubsidized loan, as well as the pros and cons of both.
Subsidized Loans First up is the subsidized loan. The major benefits of this loan are that (1) the government backs your loan (allowing you to secure better terms), and (2) no interest can accrue on the loan while you attend school half-time. Nor can it accrue interest if proper schooling deferment is taken care of. The government pays the interest during those times, allowing you to not get in completely over your head while you are unable to pay back the loan under your name. Even if you qualify for the loan, it will only pay for that interest under certain conditions. You must be in school at least half-time, fall within the first six months after you leave school, and be properly deferred. There are often maximum amounts of money you can borrow each school year. Be sure to find out what those are and see if they’ll help you meet your needs.
Unsubsidized Loans Unsubsidized loans, on the other hand, are available to undergraduate and graduate students, and are still backed by the government. The only difference is that the interest on these loans begins accumulating from the time the loan is taken out. It will accrue if you don’t pay those and be capitalized (interest added to the principle). It’s definitely in your best interests to pay that minimum amount throughout your schooling so you can avoid ridiculously large figures at the end of your accounting degree. There are often limits to the amount you can receive each year here as well. The specifics will be dependent upon the school financial aid office.
Which to choose?