Before beginning the process of acquiring financial aid, it is important to understand a few essential facts, especially when it comes to student loans. This is particularly important because more and more potential college student have to rely on so many student loans these days. To begin with, it is vital to understand the two primary kinds of student loans. There are subsidized loans and unsubsidized student loans. The two types of loans are somewhat similar, but the differences between them are key. Understanding those differences is crucial when it comes to putting together a financial aid package.
To begin with, an individual student’s need for financial aid is what determines the amount of a subsidized loan. Some common subsidized loans are the Subsidized Stafford Loan and the Perkins Loan. Succinctly, a subsidized student loan does not make students pay interest while they are enrolled in college. Instead, the federal government takes care of the interest while the student is in school. This is, in fact, why they are called “subsidized loans” – while a student is in school, the government subsidizes his or her interest for the duration. Following a student’s graduation, there is a grace period, and after that, the student must begin paying back both the loan(s) and the interest.
Conversely, unsubsidized loans stipulate that a student must pay back the loan’s interest while he or she is attending college. That is, of course, why they are referred to as unsubsidized loans – the federal government does not subsidize any of the balance for the student. As with subsidized loans, students have a grace period immediately following their graduation from college. The main difference between subsidized loans and unsubsidized loans here is that all of the financial responsibility is solely left up to the student.
Another key difference between subsidized loans and unsubsidized loans exists in the amount a student is allowed to borrow each year. As aforementioned subsidized loans depend on an individual students need for financial aid and financial status. As such, there may be a limit to how much a subsidized loan allows any single individual.
While unsubsidized loans may also limit the amount given to any one student, their limitations are usually far lower than those for subsidized loans. In general, unsubsidized loans allow students to borrow as much as five thousand dollars more than subsidized loans offer.
In most cases, a student must be enrolled in college on a part-time basis, at least, in order to receive either a subsidized loan or an unsubsidized loan. If a student with a subsidized loan finds that he or she needs more money, he or she can certainly turn to an unsubsidized loan instead. However, that is not the only other option at all – there are many types of student aid available; these are just two of the most common kinds. There are also a variety of grants, scholarships, and private loans available if a student’s subsidized or unsubsidized loan does not meet all of his or her financial aid requirements.