Difference Between A Subsidized And An Unsubsidized Student Loan

Difference Between A Subsidized And An Unsubsidized Student Loan



Difference Between a​ Subsidized And An Unsubsidized Student Loan
Getting a​ federal loan is​ a​ very good thing; anyone would agree with that .​
However,​ the​ most common misconception is​ that the​ loan is​ given by the​ government directly to​ the​ students,​ and after they have graduated,​ they do not need to​ pay This may sound misleading,​ but in​ fact it​ is​ what many people believe is​ the​ way it​ works.
A federal loan is​ usually given through an​ institution,​ usually a​ common financial institution that the​ students know of .​
This loan can be divided into two different forms; the​ subsidized and unsubsidized student loan .​
So how does an​ unsubsidized loan differ from a​ subsidized one? Technically,​ the​ subsidized student loan and unsubsidized student loan do not differ much in​ nature.
Similarities
Firstly,​ both the​ subsidized and unsubsidized student loan is​ equally guaranteed by the​ US Department of​ Education .​
This can be either directly or​ through certain guarantee agencies .​
All students are equally eligible to​ receive both the​ loan types,​ although certain distinction may apply to​ determine the​ subsidization .​
But there is​ no distinction of​ credit scores or​ other financial issues,​ except for the​ factor of​ family income.
Secondly,​ both the​ subsidized and unsubsidized student loan offers a​ grace period of​ six months .​
This is​ a​ common grace period given by almost all kinds of​ student loans .​
This would mean that the​ student does not need to​ pay until six months after his graduation .​
Another alternative would be three months after the​ student becomes a​ less-than-full-time student without graduating,​ meaning that even before one complete his studies,​ he starts working part-time .​
Both the​ loan types offer the​ same amount of​ loan limit.
Differences
The difference lies in​ the​ interest .​
For the​ subsidized student loan,​ the​ government pledges to​ pay the​ interest to​ the​ moneylender while the​ student is​ studying .​
For the​ unsubsidized student loan,​ the​ student pays his own,​ although it​ varies according to​ his financial capacity almost every year .​
For example,​ if​ the​ student borrows $2600 a​ year,​ for unsubsidized student loan repayment,​ he has to​ pay back $2600 plus interest .​
For a​ subsidized one,​ he only pays the​ $2600.
Although the​ difference is​ only in​ the​ interest,​ it​ is​ a​ significant difference as​ it​ can make or​ break your monthly budget especially if​ you​ are just out of​ college and looking for a​ decent job .​
Therefore,​ wherever and whenever possible,​ try to​ secure a​ subsidized loan; it​ will make a​ huge difference when repayment time arrives.




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