Unsubsidized Student Loans

While researching the best financial aid options for your college education, you've likely come across the Stafford Loan as a helpful source for funding. Provided by the federal government, the Stafford Loan comes with two options: subsidized and unsubsidized student loans.

Subsidized loans are offered to those who are in great financial need. The government will provide the interest payments to the lender for you, making this the only kind of federal loan that is interest-free for the borrower. Because of the special circumstances, subsidized Stafford loans are hard to obtain, and funds are usually disbursed in very small amounts, usually meaning that these types of loans cannot cover the total cost of your education.

However, the unsubsidized student loan, which is offered by most private lenders, requires that the student pay all interest that accrues. The government also offers direct unsubsidized loans, with a fixed rate of 6.8% for both undergraduate and graduate students. 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.

The main difference between a federal Stafford Loan or Perkins Loan and a private loan is that you can take advantage of payment deferral through government lending programs and not have to worry about 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. For this reason, it is best to exhaust all of your federal loan options, in addition to any available scholarship or grant money, before borrowing unsubsidized loans from private lenders.

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.