Subsidized loans are made by the federal government. Unsubsidized loans are made by private organizations. It is not that they are intentionally set out to be different but that they must deal with the unique financial circumstances of students and families.
The financial aid office at your college or university can help you understand both types of student loans. The main difference between subsidized and unsubsidized student loans is in the way that the money is disbursed by the government to students. This may be more important to you than whether you get an unsubsidized or subsidized loan because if your financial circumstances change then you may find that your subsidized loans will have to be revised.
If you are considering going back to school, there are federal subsidized loans for that purpose. You can also look into private and student loans that may be available depending on where you go to school. It is a good idea to check out the financial aid office at your school.
Now that you know the difference between subsidized and unsubsidized student loans you can begin thinking about which type would be best for you. Are you looking for financial aid so that you do not have to pay for tuition? Or do you want to go back to school to further your education? Or perhaps you already are in school and just need some additional financial help. No matter what your reason for wanting to get a subsidized loan, knowing the pros and cons of getting one is very important.
The first major difference between subsidized loans and unsubsidized loans is the level of interest you will pay. With subsidized loans, your interest will be covered by the government. Subsidized loans are usually guaranteed. This means you are pretty much covered all throughout your schooling. This makes them very attractive for students.
The second major difference between subsidized loans and unsubsidized loans is the amount of money you will be paying back. With subsidized loans you will only be paying back the interest part of the loan. You will not be paying any of the principle. In most cases, subsidized loans are only offered to students who are attending public or private colleges. If you are a part of a government program such as the FAFSA (Free Application for Federal Student Aid), you will likely be able to get subsidized student loans without paying any interest. However, unsubsidized loans are available for any student with the ability to qualify.
The last major difference between subsidized and unsubsidized loans is the way in which payments are determined. In most cases with subsidized loans, the amount of money you pay each month will determine how much you pay back. In many cases with unsubsidized loans, your payment will depend on how much money you borrow. Many students borrow more than they need and having to start paying back more than you want at first can be frustrating. As long as you know how much money you need to borrow and how much you can afford to borrow then you will be able to make an informed decision when deciding which type of student loan is right for you.
If you are applying for federal financial aid, you will be asked whether or not you want to get a subsidized loan or an unsubsidized loan. Most students end up going with the subsidized loans simply because they prefer to receive federal financial aid. It is important to remember that federal financial aid only pays the interest while you are in school so you will not be responsible for any payments after you leave school. So, if you plan to go back to school in the future it may make sense to get an unsubsidized loan now.
