Subsidized vs. Unsubsidized Federal Student Loans
Federal student loans usually fall into two categories, subsidized or unsubsidized. Subsidized loans are granted based on the financial needs
of the student and their families. The amount of the subsidized loan is determined by the school. The interest on subsidized loans does not start
to accumulate until the repayment process begins. Also, you are not responsible for paying any interest during grace or deferment periods.
Unsubsidized loans charge interest starting when the money is administered. When the repayment period begins, you must pay interest on the interest
that has already begun to accumulate. One way to avoid paying so much interest is to pay the interest as it accumulates.
Examples of Federal Student Loans
Federal Stafford Subsidized and Unsubsidized Loans
The most common types of federal student loans are the federal Stafford subsidized loan and federal Stafford unsubsidized loan. To be eligible for
these loans you must fill out the free application for federal student aid (FAFSA), be enrolled or will be enrolled in school for at least half-time,
attend a college that is involved with the Federal Family Education Loan Program, and must not be in default on any other student loans. For graduate
and professional students with a subsidized loan, and for all students with an unsubsidized loan, the interest is fixed at 6.8%. The interest rate for
undergraduate students awarded a subsidized Stafford loan between July 1, 2008 and June 30, 2009 is 6%. There are loan limits that apply to both
Stafford loans. The limits may depend on what year the student is in and whether they are an independent or dependent.