With the cost of a college degree rising each year, more and more students are relying on federal student loans to keep their dreams alive. And once you receive your award letter, you may see listings for both subsidized and unsubsidized student loans.
But all the words used to describe the different types of loans available can sound like cryptic jargon.
This post throws a stone into that cloud of confusion.
Today, I’m going to explain the difference between the terms “subsidized” and “unsubsidized student loans” when it comes to the Federal Direct Student Loan Program.
The William D. Ford Direct Loan Program is the largest loan program offered by the US Department of Education. Basically, it’s the “law” that defines what you can and can’t do with student loans.
Subsidized and non-subsidized loans are two of the four types of direct loans. These are the most common types of loans that undergraduates get. Let’s take a closer look at what they mean, what you need to know, and your options if you need to borrow more.
subsidized student loans
If you qualify for a Federal Direct Aid Student Loan, you should definitely take advantage of it as it is one of the best student loans available.
unsubsidized student loans
Who is eligible for direct financing?
To qualify for direct financing, there are a number of factors to be aware of. There are also limits on how much you can borrow with a direct student loan.
Points to note: Most male students are required to enroll in. selective service to receive federal aid.
How much can I borrow?
There are different borrowing limits depending on whether you are a dependent or an independent student. Restrictions also vary by grade level.
You can also borrow less if the amount determined by the school is more than you actually need. This is useful if your goal is to pay off your student loans faster.
Once your loan is approved, the money will be sent directly to the school, who will apply the money to the school account for tuition and fee payments.
Here are the current student loan limits:
$5,500 – subsidy not exceeding $3,500
$9,500 – Subsidies up to $3,500
2nd year undergraduate
$6,500 – subsidy not exceeding $4,500
$10,500 – $4,500 subsidies available
Undergraduate 3rd year and above
$7,500 – Subsidy up to $5,500
$12,500 – $5,500 subsidies available
professionals and graduates
Note: All graduate and professional students are considered independent students. Also, graduate and professional students are not eligible for subsidized loans.
There is also a total loan limit that must be followed.
Dependent Students: $31,000, subsidies up to $23,000
Independent student: $57,500 for undergraduates, grants up to $23,000
Professional and graduate students: $138,500 for college and graduate students, grants up to $65,500. These loan limits include the total amount of loans received while undergraduate.
How long does it take to pay off a direct loan?
Unsubsidized student loans have a six-month “grace period” once you leave school, and you don’t necessarily have to pay the loan, but you do have to pay interest accrued on the amount you repay. Borrowed.
In most cases, subsidized student loan borrowers don’t have to worry about payments until the grace period ends.
The repayment period begins the day after the end of the grace period. This is true for both subsidized and unsubsidized student loan borrowers.
Because you never want to miss your repayment start date, it is important to communicate clearly with your loan servicer to confirm details such as when your repayment period begins, how much you will pay, and how you will pay.
If for any reason the interest cannot be paid within the six month grace period (under the No Subsidy Program), the interest amount will be capitalized. This means that interest will be added to the principal amount, which can increase your monthly payment.
It usually takes 10 to 25 years to pay off student loans.
This term is extended for up to 30 years if you choose to consolidate your loans using the Direct Consolidation Program.
Both subsidized and non-subsidized loans have the opportunity to take advantage of income-based repayment programs such as PAYE and REPAYE.
What if I want to borrow more?
Many people look at subsidized and unsubsidized student loan limits for undergraduates and don’t know how to pay for college. If you’re going to borrow full college tuition, that’s a reasonable concern. But remember that college tuition is a piece of pie and there are many different pieces to choose from.
For more information on the “best” way to pay for college, check out this article: Best Ways to Pay for College.
If you have already exhausted other options and know the ROI to your education, you can consider private loans.
Students are encouraged to shop and compare private loan options before taking advantage. reliable is a great option as it allows you to compare about 10 different lenders in 2 minutes and see which one fits your criteria. Click here for Credible.
We also have a complete comparison tool here on the best private loans to pay for college.
Let us know what you think in the comments.