With so many different lenders and nearly innumerable types of private loans, a potential borrower can easily become distracted by all the hubbub surrounding his financial aid situation. These newbies should know that in the world of educational financing, subsidized student loans reign supreme. Subsidized student loans offer the best choices for borrowers looking to supplement or completely pay for their educational expenses.
What is the Difference?
Students new to the financial world are often confused by the jargon, thus leading to an incomplete understanding of exactly what they are getting themselves into. Although both subsidized and unsubsidized student loans are issued as federal loans, there are a great number of differences that make each type of loan unique.
The subsidized student loans are based solely upon financial need and have set maximum amounts a student may borrow per school year. The greatest advantage to this type of loan is the lack of accruing interest during periods of college enrollment. The federal government will pay the interest on the loan for as long as the borrower is enrolled at least half-time in a college or university; this also holds true during times of deferment episodes.
The unsubsidized student loans are not based upon financial need but still have preset limits that a student may borrow for each school year; it is important to note that the maximum amount that can be borrowed differs for each type of federal loan and varies according to class status. Unlike the subsidized loans, these loans accrue interest from the issue date and during deferment periods.
Do not panic if you receive a statement declaring the amount of accrued interest on an unsubsidized loans; these are merely required quarterly updates to inform you of your loan status. Payments are not due on either type of loan until the borrower has graduated or dropped below the required minimum number of credit hours per semester.
Do I Qualify for a Subsidized Student Loan?
Many people fall within the requirements to be eligible for a subsidized loan; the borrower must have the following prerequisites:
1. Be a United States citizen or eligible non-citizen
2. Hold a high school diploma or equivalent certification
3. Enrolled half-time or more in an accredited educational institution
4. Completed the F.A.F.S.A.
5. Be current in any existing federal loans
Loan amounts are based on the F.A.F.S.A results; once this paperwork is completed and processed, the Department of Education and your learning institution will determine if you are eligible for a subsidized student loan and the maximum amount you may borrow. Take note that although you may be offered the maximum amount of money (i.e. $5,500), you may borrow the whole total or just a portion (i.e. $3,000) with the same terms applicable to both amounts.
Don't let financial terminology confuse you and make your financial decisions harder than they need be; do your homework and get comfortable with common words and phrases. Although unsubsidized and subsidized student loans sound similar, the differences between the two can result in less debt and greater financial freedom after graduation. Taking the appropriate steps to prepare yourself with this knowledge will all but guarantee smooth sailing through the uneasy financial aid waters that lie ahead.
To gain more knowledge on how and where the subsidized student loans to be used visit Student Loan Refinance Rate
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