Direct Unsubsidized Loan

For most people just entering college, the number one thing on their minds will be how to finance the cost. Higher education costs have been on the rise with the decrease in funding provided by many of the organizations who in the past provided grants and scholarships to students.

The first step that a person must take when beginning college is to sign up for all of the various grants that are available through the Federal Government. This includes applying by filling out the FAFSA form to allow for a calculation of family contribution that will be expected and to qualify you for student financial aid. This form is also the first step in applying for direct unsubsidized loans for paying for the cost of higher education.

First the student will need to answer questions and provide income information for use in determining eligibility. Depending on the student's age they may also need to provide their parents income information. The Pell Grant is usually given to all students if they are eligible. The next part of this application will ask if a student is interested in student loans. When you select yes, you will be offered varying amounts of loans that you can receive for financing your education.

The first type of loan is a subsidized loan. This means that the government handles the interest payments while you are in school at least part time. Part time for an undergraduate student is set at six credit hours per session. After the subsidized amounts are received, the student is eligible to receive additional funding that is called a direct unsubsidized loan.

The unsubsidized loan accrued interest while you are attending school. You can choose to make payments on the interest while you attend school however. For both types of loans the interest rate is set and locked in at the time you apply. Currently it is at 6.8%. When you are finished with your schooling you will be given a grace period of six months before any payments are due.

The good thing about these loan programs is that your credit score and income are not a factor in qualifying to receive them. You also are not required to prove that you will need this financial aid due to your income circumstances. Unlike other types of student loans that are provided by private lending institutions, you will not be subjected to credit reports beyond checking to ensure you have not defaulted on any other type of financial aid in the past that is still outstanding.

Financial aid is intended for use for school related expenses which can include housing, books, electronics and other supplies that may be required. For most this will be a relief as many things that are required for higher education are not always covered by grants and scholarships. In addition the lower amounts of financial aid being offered today usually requires another form of financing be used as well. Many cannot afford to pay out of pocket if there is no savings account set up for this purpose.

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