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.
Video of the Day
Brought to you by Sapling
- Design Pics/Design Pics/Getty Images