What is the difference between subsidized and unsubsidized?
Subsidized: If you receive a subsidized Stafford loan to attend IU Southeast, the federal government pays the interest on your loan while you attend school at least half time. Unsubsidized: If you receive an unsubsidized Stafford loan to attend IU Southeast you are responsible for paying the interest while you are in school. If you do not want to make the interest payment, the interest will be added to your principal balance through a process called capitalization.
Subsidized loans are those loans for which the government pays the daily interest your loan builds while you’re in school, for the first six months after you leave school and if you qualify to have your payments deferred. The government distributes subsidized loan amounts based on financial need. Unsubsidized loans are those loans for which you, the borrower, have to pay all accrued interest. The government does not offer any assistance relating to interest payments for unsubsidized loans. You can receive both subsidized and unsubsidized loans for the same enrollment period as long as you don’t exceed the annual loan limits.
A. Subsidized Stafford Loans are need-based and the interest is paid by the U.S. Department of Education while the student is in school, in the grace period, and in authorized deferment periods. Unsubsidized Stafford Loans are not need-based. The interest payment is always the borrower’s responsibility. A borrower can choose to pay interest that accrues while the borrower is in school, in grace, in deferment or other times when payments are not otherwise expected can be paid, or the unpaid accrued interest will be capitalized, i.e., added to the outstanding principal amount of the loan.
Related Questions
- What if I have exhausted my annual Federal Direct Subsidized/Unsubsidized Loan eligibility and I still have not reached the cost of attendance? How do I secure additional loans?
- What is the difference between a subsidized loan and unsubsidized loan?
- Do subsidized housing units depreciate faster than unsubsidized ones?
