Direct Unsubsidized Loan

Beginning college will mean you need to cover the costs. Some are able to receive grants and scholarships for most of the cost but the available funds for this are very limited. As a result many turn to student loans to help cover the expenses of a college education. There are two common types which are subsidized and unsubsidized.

Subsidized and unsubsidized loans are granted by the government. Eligibility requirements for both are the same which include being a US citizen, being working on an eligible degree, have a high school diploma, males must register with the Selective Service, keep your grades up, not be convinced of any drug related charges and not owe any repayment on any federal grant from the past.

Similarities between the two end at this point however. Subsidized loans are loans which the government pays your interest payments on during any period of authorized deferment. This means that the entire time you are registered for more than half time, the government will pay your interest charges. Unsubsidized loans do not have interest payments made by the government. However you are allowed to defer the interest payments while you are attending school.

In order to qualify for subsidized loans you will need to demonstrate financial need. For most this means that your expected family contribution will be a very low number. Unsubsidized loans do not require you to demonstrate financial need. If you qualify for subsidized loans you will need to request the maximum amount allowed before you can request the unsubsidized loan amounts.

After graduation both loans offer a six month grace period with no payments due. Subsidized you will not be required to make any payments at all. Unsubsidized will charge you interest during the six month grace period however. During undergraduate schooling you are limited to the amount of these types of loans you can receive. The amount varies based on your grade level or year in school such as freshman, sophomore, junior or senior. Seniors are eligible for the total amount and freshman are limited to the lowest amount. The highest amount that can be borrowed in any one calendar year is $23,000.

Another con of either type of loan that it is easy to get carried away with the amounts that you borrow. You should limit yourself to borrowing only the amount that you will need for the educational expenses. When there is a balance remaining after your expenses are taken care of the amount is generally refunded to you. This is when students run into problems.

Which one you like? This is how Subsidized vs Unsubsidized Student Loans turn out.

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