What is the difference between subsidized and unsubsidized loans?

What is the difference between unsubsidized and subsidized loans?

• Answer:

  Once your application for financial aid is processed, your college will send you a financial aid package listing the types of funding you qualify for, including eligibility for subsidized and/or unsubsidized loans.Subsidized LoansSubsidized loans are government loans based on financial need, and the federal government will pay (subsidize) the interest that accrues on the loan.Unsubsidized LoansUnsubsidized loans are government loans that are not need-based, and you are responsible for all interest that accrues from the time of the first disbursement until the loan is repaid.ConsiderationsThe interest on an unsubsidized loan is capitalized, meaning you will be paying interest on the already accruing interest of the loan. To reduce this capitalization of interest, you may opt to pay the interest monthly, as it accrues, without penalty.EligibilityTo find out if you are eligible for a subsidized or an unsubsidized loan, you must file a federal student aid (FAFSA) application. Your college will send you a letter when your application is processed to let you know what financial aid you are qualified to seek.RepaymentFor both subsidized and unsubsidized loans, your loan will enter a repayment status six months after your enrollment status drops below half time.Source:http://studentaid.ed.gov/PORTALSWebApp/students/english/studentloans.jsphttp://www.staffordloan.com/stafford-loan-info/faq/whats-the-difference-between-unsubsidized-and-subsidized-loans.phphttp://www.staffordloan.com/stafford-loan-info/unsubsidized-student-loan.phpMore Information:http://studentaid.ed.govhttp://www.fafsa.ed.gov/