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Unsubsidized Student Loans

You've done your homework and researched the possible sources of funding for your college education, and it seems like the most likely first source of financial aid is the Stafford Loan, provided by the federal government, assuming that the FAFSA you complete qualifies you for federal funding. However, you've also made note that there are two types of Stafford loans available — subsidized and unsubsidized student loans. You want to know more about the unsubsidized student loans, since it appears this is what you will most likely qualify for.

Subsidized loans are for those who are in great financial need, and you'll find that, while all private loans require you to pay your own interest, a subsidized loan through the federal government does not require you to make interest payments. In fact, with these no-interest loans, the federal government provides the interest payments to the lender for you. These are very hard to qualify for and are usually offered in small sums.

However, the unsubsidized student loan, another version of the Stafford loan and the configuration found with most private lenders, requires that the student pay all interest that is due upon the loan. Perkins Loans are the same, with a set 5% interest rate. Unsubsidized loans are not based on need and are, instead, doled out based on availability and the cost of your college or university program. Since the government can offer some funding to most parties, these amounts tend to also be small, though less restricted than subsidized loans.

With a private lender, almost all loans will be subsidized. The main difference between a federal Stafford Loan or Perkins Loan and a private loan, aside from the interest rate being lower through government programs, is that with the federal government, you can take advantage of payment deferral, not paying a penny toward your loan until up to six months beyond graduation. With a private loan, you are typically immediately responsible for at least the interest on the loan until a specified grace period beyond graduation ends, at which time payment in full becomes due.

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.