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Subsidized Student Loans

As you read through the brochures and websites full of information on loans, you notice that the Stafford Loans are the most commonly disbursed but also see that there is more than one type of loan — subsidized and unsubsidized. You are particularly interested in the subsidized student loans, taking note that they are interest-free, but you aren't sure what the qualifications are or how the loan process actually works. What is involved in qualifying for subsidized student loans?

To understand subsidized student loans, you must first understand the configuration of a standard loan. In order to obtain most loans, you must submit to a credit check. Upon approval (based on a GOOD credit history, not a negative or non-existent one), an interest rate is fixed, and payments become due immediately upon disbursal. In some cases, where student loans are concerned, payments may be for interest only until the student graduates.

With a subsidized loan, no interest must be repaid by the borrower. The federal government handles this portion of the loan fees with the lender. However, there are very strict rules by which the administration of subsidized Stafford Loans are governed, and not just anyone can be approved. The qualifications are as follows:

As with all government funding opportunities, the FAFSA is the standardized application form for determination of eligibility.

Students must show, through the completion of the FAFSA, that they are severely lacking in adequate funding for college or university attendance, based on a low EFC (Expected Family Contribution).

The student must be enrolled in at least a half time college student program to qualify.

No credit check is required; therefore, students without credit history who can prove “independence” from a parent may be eligible; however, while parents with bad credit history are still eligible, having a high income disqualifies their student for subsidized student loans.

If you don't qualify for subsidized student loans, you can still obtain low interest unsubsidized Stafford Loans and Perkins Loans, which will offer you savings in comparison to a personal or private loan from another lending institution.

Paying for school is not easy, but we are here to help. OEDb's student finance section will help you find the money you need to pay your tuition and other college expenses. We cover scholarships, college grants, and student loans. Scholarships and grants are both forms of "free money", meaning they don't need to be paid back. Scholarships are typically awarded by businesses or individuals, with the money being earmarked specifically for tuition. They can be awarded based on a student's location or by religious affiliation, such as Catholicism or Islam. Grants are typically awarded by governments or non-profit organizations and the money often can be applied to several different expenses a student may incur, not solely tuition. They can be awarded based on location or ethnicity, for instance African American or Hispanic. Loans are not considered "free money", because unlike scholarships and grants, they do need to be paid back after graduation. Common federal loans include Perkins and Stafford. Loans are also available by location.