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.
Similarly one may ask, are subsidized student loans good?
Pros and Cons of Subsidized Loans
Because the federal government pays the interest during the periods noted above, subsidized loans will save you money. They offer flexible repayment options you won’t find with private loans. You’ll pay lower interest rates on these loans than on comparable private student loans.
Likewise, people ask, do subsidized loans build credit?
Yes, student loans do affect your credit standing. … Your lender will report account information to the major credit bureaus each payment period, thereby adding positive information to your file and thus boosting your score – assuming you pay as agreed.
Is Pell grant subsidized or unsubsidized?
A Pell Grant is a federal subsidy awarded to students for post-secondary education. Pell Grants are awarded on the basis of financial need and, unlike student loans, do not have to be repaid except in rare instances.
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.
Subsidized loans can save you thousands of dollars in interest charges in the long run. But you might need to rely on unsubsidized loans if you don’t qualify for subsidized loans or have met the subsidized loan limit.
Cons of Unsubsidized Student Loans
- You, as a borrower, are technically taking out a general loan, which makes you liable to pay the entirety of it on your own, including all the interest payments.
- You do have a 6-month grace period during which you don’t have to pay interest.
There are four types of federal student loans available:
- Direct subsidized loans.
- Direct unsubsidized loans.
- Direct PLUS loans.
- Direct consolidation loans.
Subsidized Stafford loans are not available to graduate students. There are strict limits on the annual and total amount you can borrow for both undergraduate and graduate students. A loan origination fee of 1.069% is taken immediately out of each disbursement. Rates for new loans change year-to-year.
Pros and Cons
- No interest is accrued if you are enrolled in school.
- After graduation, the loan will not accrue interest for six months.
- Income driven repayment plans.
- Eligible for deferment.
- Eligible for forbearance.
- Fixed interest rate.
- No credit check.
- Tax deductible interest.
What can student loans be used for?
- Tuition and fees.
- On-campus room and board.
- Off-campus housing and utilities.
- Transportation, including gas, tolls, buses and trains.
- Books, supplies and equipment related to your major.
- Miscellaneous personal supplies, including toiletries and medication.
Unsubsidized student loan perks include: You aren’t required to demonstrate financial need. This can be helpful in many situations, such as when you’ve reached your borrowing limit on need-based subsidized loans and still don’t have enough to fully cover school costs.
Federal Student Loan Lifetime Limits
|Year In School||Dependent Students*||Independent Students**|
|Lifetime limit||$31,000—no more than $23,000 can be subsidized||$57,000 for undergraduates—no more than $23,000 can be subsidized $138,500 for graduate and professional students—no more than $65,500 can be subsidized|
Parents and graduate students may be eligible for PLUS loans, another type of federal student loan. At 7.08%, these have the highest interest rate of any federal student loan. It should be noted that there is an aggregate limit to how much money students may borrow on federal loans.