Federal Subsidized Versus Unsubsidized Loans


The increasing cost of tuition is forcing thousands of students to take out loans to pay for higher education. The most common approach to applying for loans is by completing the FASFA, or the Free Application for Federal Student Aid. After review, most students will either qualify for a subsidized or unsubsidized student loan. It is important to be aware of the differences between these types of loans, as it will affect your interest rates and payment options.

Subsidized Loans

Students who qualify for subsidized loans receive loans to help them pay for college; however, they generally do not cover all related expenses. One of the many benefits of subsidized loans is that students do not have to begin making payments until 6 months after their graduation. Additionally, they do not have to pay interest on their loan until their 6-month grace period is over. Many students who receive subsidized loans are able to defer them longer; however, they will have to pay interest.

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Unsubsidized Loans

The majority of students who submit a FASFA receive unsubsidized loans. These loans provide students with the money they need to pay for college; however, they begin accumulating interest immediately. While students can defer payment until post-graduation, the accumulated interest will be included in what they owe. Students receive a six month grace period following graduation; however, once the grace period is over, they must immediately begin repaying their debt.

Resolving Debts

The current economy is making it difficult for students to find jobs that will enable them to repay their debts 6 months after graduation. Saturated job markets and unemployment spikes are making it increasingly difficult for students to support themselves while making heft payments toward their debtors.

In special cases, students may apply for an extended deferral of their payments; however, there are other options, as well. If you become a teacher following graduation, you may have a substantial amount of your loans pardoned. Other forms of social work may also enable you to qualify for pardons. To learn more about your options for repaying student loans, contact an attorney.

If you are struggling to pay off your student loans because of additional debts that you have accumulated, you may want to consider filing for bankruptcy. For more information about how bankruptcy can help resolve your outstanding debts, contact the West Palm Beach bankruptcy attorneys of Eric N. Klein & Associates, P.A. today.


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