The government pays the accruing interest on subsidized loans while a borrower is in school and during the loan’s six-month grace period. Subsidized loans have lower interest rates than unsubsidized loans.
One may also ask, are fafsa loans interest free?
Federal Direct Subsidized Loans, which are awarded to lower-income students who complete the FAFSA, are technically interest-free, but throughout your repayment. … Otherwise, interest accrues on subsidized loans as it does with other federal and private loans.
Likewise, can you pay off subsidized loans while in school?
Direct Subsidized Loans and Perkins Loans do not accrue any interest while you are enrolled in school at least half-time and during the grace period. If you pay off the balance before the grace period ends, you’ll repay just the amount borrowed, plus any loan fees. That would make the loan interest-free!
Do subsidized or unsubsidized loans have higher interest?
When choosing a federal student loan to pay for college, the type of loan you take out — either subsidized or unsubsidized — will affect how much you owe after graduation. If you qualify, you’ll save more money in interest with subsidized loans.
Subsidized Loans are loans for undergraduate students with financial need, as determined by your cost of attendance minus expected family contribution and other financial aid (such as grants or scholarships). Subsidized Loans do not accrue interest while you are in school at least half-time or during deferment periods.
To be eligible for a subsidized loan, you must:
- Be an undergraduate student.
- Be able to prove financial need.
- Be enrolled at a school at least half-time.
- Be enrolled in a program that can lead to a degree or certificate awarded by the school.
What’s the difference between Direct Subsidized Loans and Direct Unsubsidized Loans? In short, Direct Subsidized Loans have slightly better terms to help out students with financial need.
There are four types of federal student loans available:
- Direct subsidized loans.
- Direct unsubsidized loans.
- Direct PLUS loans.
- Direct consolidation loans.
Parent and student loan comparison chart
|Smart Option Student Loan® for Undergraduate Students||Sallie Mae Parent Loan|
|Variable rate*||1.13% APR to 11.23% APR2||3.37% APR to 12.99% APR3|
|Fixed rate*||3.50% APR to 12.60% APR2||5.49% APR to 13.87%3|
Subsidized Loans do not accrue interest while you are in school at least half-time or during deferment periods. Unsubsidized Loans are loans for both undergraduate and graduate students that are not based on financial need.
What are the interest rates for federal student loans?
|Loan Type||Borrower Type||Fixed Interest Rate|
|Direct Subsidized Loans and Direct Unsubsidized Loans||Undergraduate||3.73%|
|Direct Unsubsidized Loans||Graduate or Professional||5.28%|
|Direct PLUS Loans||Parents and Graduate or Professional Students||6.28%|
Federal student loan interest rates 2020-2021
2.75% for undergraduates. 4.30% for graduate students. 5.30% for parents and graduate students taking out PLUS loans.
If you have a mix of both unsubsidized loans and subsidized loans, you’ll want to focus on paying off the unsubsidized loans with the highest interest rates first, and then the subsidized loans with high-interest rates next. Once these are paid off, move on to unsubsidized loans with lower interest rates.
Which to Borrow: Subsidized vs. Unsubsidized Student Loans
|How interest works while you’re enrolled in college||Education Department pays interest||Interest accrues|
|Who can borrow||Undergraduate students only||Undergraduate and graduate or professional degree students|
The Problem With Sallie Mae or Navient Loans
They are private loans. Sallie Mae and Navient offer few to no options for repayment and do not offer any kind of income-based repayment plans. … No student loan is protected by bankruptcy—not private loans, not federal loans, none of them.
The interest rates on federal student loans are set by Congress and can change each year. For the 2021-22 academic year, the interest rates on federal Direct Loans will be rising.