As summer break winds down, students are preparing to start college or return back to school (Which also means that college football will be back!).
The cost of college is expensive, and we may need some support from the government (Department of Education) with student loans. It’s important to note that there are two distinctions of student loans you can receive, subsidized and/or unsubsidized loans.
As a former student, this concept was tricky for me to understand so let’s break it down!
What is the difference between a borrower and lender?
To begin with, there are two parties involved in a loan agreement – the borrower and the lender. If you’re a student, you act as the borrower, while the government acts as the lender.
Borrower = YOU
Lender = Government
What is the difference between a subsidized and unsubsidized loan?
If you’re offered a subsidized loan while you’re a student, you don’t pay any interest on the loan – how exciting! The government will actually pay the interest on the loan for you until you graduate.
On the other hand, unsubsidized loans accrue interest while you’re still in school (I know, bummer).
So if you’re thinking of paying down your student loans early, make sure you tackle unsubsidized loans first because they will accrue an interest balance.
Am I eligible for subsidized loans?
According to the department of education, the following must apply to be eligible:
“Direct Subsidized Loans are available only to undergraduate students who have financial need.”
We understand this is a broad statement, but there aren’t clearly defined rules to determine eligibility for subsidized loans except for that requirement.
If you’re a student and need more questions answered – please reach out to us! Good luck and have a great fall semester!