Understanding the difference between subsidized vs. unsubsidized student loans could help you save a bundle in student loandebt.
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Loan throw in Comparison
Based on this chart, the winner is direct subsidized loans.
But lets take a closer look at each.
Who Qualifies for a Direct Student Loan?
Youll need to be an undergraduate student who can prove financial need to qualify for direct subsidized loans.
Your colleges financial aid office determines your eligibility.
Direct unsubsidized loans do not require you to meet a financial need threshold.
They are available to undergraduate, graduate and professional-level students.
Here are the details about proving financial need.
What Are the Annual Loan Limits for Direct Federal Loans?
Unsubsidized loans have higher limits.
Well break down the limits by loan pop in provided by theDepartment of Education.
Unsubsidized Loan Limits for Undergrads: Dependent vs. ## Can You Survive 10 Days of Budgeting?
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Is There a Time Limit for Direct Federal Loans?
Heres the breakdown for both.
That limit is 150% of the published length of the program you were enrolled in.
There is no eligibility time limit for unsubsidized federal loans.
How Does Interest Accrue on Federal Student Loans?
If you have an unsubsidized loan, interest accrues each year of college and during your grace period.
After the grace period ends theinterest capitalizes.
Both years, they each receive $5,000 loans with a 3% interest rate.
Sara qualifies for a subsidized loan while John gets an unsubsidized loan.
Lets see where each ends up.
Subsidized vs. Unsubsidized Interest Comparison
What Are the Interest Rates for Direct Federal Loans?
Each year, the federal government sets the interest rates for all student loans.
Do Federal Loans Charge Fees?
On a $3,000 loan, the fee would be $31.71, so youd receive $2,968.29.
How Will I Receive My Subsidized or Unsubsidized Loan?
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Congress renamed the federal direct loan program in 1988 to honor U.S. Another name you might hear: Federal Family Education Loans (FFEL).
This program ended in 2010 all subsidized and unsubsidized student loans are now made under the direct loan program.
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The colleges that you apply to will use your FAFSA form to decide your financial aid eligibility.
Heres our step-by-step guide to filling out theFAFSA.
When possible, stick with direct federal loans, which are eligible forincome-based repaymentandforgiveness programs, unlike private loans.
Private student loans also arent eligible for the federal governments pause in payments and interest currently in effect.
Any further interaction in regards to your loan should go through your loan servicer.
No, they arent bad.
But unsubsidized loans do accrue interest while youre in school.
Unsubsidized loans have no financial need requirement and their limits are higher than subsidized loans.
Student loan forgivenesstypically takes years to qualify for sometimes as much as 25 years.
Many forgiveness options depend on your job being in sectors like public service.
And if you turned down money but have reconsidered, contact your financial aid office.
Most colleges and universities will reinstate an offer for federal student loans included in your original financial aid package.
Tiffany Wendeln Connors is a staff writer/editor at The Penny Hoarder.
Readher bio and other work here, then catch her on Twitter @TiffanyWendeln.
