How to Compare Unsubsidized vs. Subsidized Student Loans

by Nick Robinson
Subsidized loans can save students big bucks.

The Department of Education offers loans to students to help cover college tuition, supplies and living expenses. Students can usually borrow money throughout their college years and begin repaying the loan after graduation. Student loans typically fall into one of two categories: subsidized and unsubsidized. As soon as a student takes out an unsubsidized loan, it starts accumulating interest. The Department of Education pays the interest accumulated on subsidized loans while a student is in school.

How Valuable Is the Subsidy?

Subsidized loans can help students save thousands of dollars over the course of their education. If Student A takes out a $5,000 subsidized loan and Student B takes out a $5,000 unsubsidized loan, student B's loan will start accumulating interest immediately. When the two students graduate several years later, Student A will owe only $5,000, while student B will owe several hundred dollars more. The precise amount depends on several factors, including the interest rate and the amount of time between the loan and the students' graduation.

Who Qualifies for Subsidized Loans?

Unsubsidized loans are available to all students, but subsidized loans are only available to students with financial need. Universities calculate financial need by subtracting a student's parents' expected contribution from the total cost of attendance. If the cost of attendance is higher than a student's family can pay, the student may qualify for subsidized loans.

About the Author

Nick Robinson is a writer, instructor and graduate student. Before deciding to pursue an advanced degree, he worked as a teacher and administrator at three different colleges and universities, and as an education coach for Inside Track. Most of Robinson's writing centers on education and travel.

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