Subsidized, Unsubsidized Student Loans

By: Ian Wilkie

When researching your student loan consolidation information options you need to look into subsidized and unsubsidized student loans.

Applying for student aid is often more complex than playing the stock market, there are literally thousands of appropriate scholarships, loan programs and other forms of services, however for the overwhelming majority a Federal student loan program is likely to be the best source of funds to help pay for your tuition.

The majority of cash loaned is related to one of only six programs, Stafford loans for students and PLUS loans for parents with a few other slight versions cover a large proportion of circumstances, however over and above the programs titles and types, there are two basic classes that those seeking funding should be aware of, which one you decide will have a considerable financial impact down the track.

The two classes are, subsidized & unsubsidized student loans, students generally are not required to make payments on either style until six months after leaving school, whether he or she graduated or not, however because of the fact that interest amounts are calculated on the remaining principle, the loan amount can add up to a considerable sum over a period of time.

Subsidized loans are a type in which the government pays on behalf of the student any interest accumulated on the loan during the years they attend at school, neither the student nor any co-signer such as parents have interest applied to the principle whilst the student is in school, however the interest clock starts ticking six months after leaving.

Unsubsidized loans are the complete opposite, though re-payments could or might not be due during school years, the interest is however calculated from the day the loan is funded, even at a modest total of say $1,000.00 at 6% per year a student can incur an extra debt of $60.00 in the initial year, that does not sound like very much, however that $60.00 if left unpaid is then added to the principle, with the following years interest being 6% of $1,060.00 or $63.60.

This example is greatly oversimplified, since interest is calculated monthly not annually and therefore the total amount grows much faster, in fact exponentially since the interest amounts are typically higher and since loan amounts may without any trouble be 20 to 30 times or even more than the above example, a simple loan calculator will allow any prospective borrower to go over some sample scenarios.

Many loan packages are a mixture of subsidized and unsubsidized loans with funds possibly coming partly from a Stafford loan, or partly from a PLUS loan, or any number of other appropriate types and sources, many students may not qualify for certain Federal student loans, because of parents wages or other reasons, in these circumstance private loans and other funding sources have to be relied on, the only way to know for cretin is to complete the standard FAFSA (Free Application for Federal Student Aid) application form, using that in conjunction with the accompanying information showing parents and student wages, credit histories, existing debt loads and other information, loan officers form a decision about whether or not to grant the loan, some students may qualify for at least partial aid, it's critical to keep this information at hand when considering any student loan consolidation information.

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