What is an Unsubsidized Loan?
Unsubsidized loans are a type of federal student loans offered by the U.S. Department of Education. Unlike subsidized loans, unsubsidized loans are not based on financial need. This means that anyone can qualify for an unsubsidized loan, no matter their income level.
Here are the main differences between subsidized and unsubsidized loans
- Interest: With unsubsidized loans, you are responsible for paying interest on the loan from the moment the funds are disbursed (sent) to your school. The government does not subsidize interest during school term, deferment or forbearance. This means that interest is added to your loan balance, which can increase your total amount owed over time.
Here are some other things to know about unsubsidized loans
- They are available to both undergraduate and postgraduate students.
- They have interest rates set by the government each year.
- You don’t have to repay the loans at least half the time you’re in school, but interest will continue to accrue.
- You have a grace period before you begin repayment after graduation.
If you’re considering an unsubsidized loan, it’s important to know how interest works and how it may affect your total repayment amount. It’s always a good idea to explore all of your financial aid options before borrowing money for school.
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