Unsubsidized Loans What You Should Know?
In recent years, the cost of a college or university education is steadily on the rise. According to a 2010 study by the National Center, a four-year degree from a private institution costs an average of $35,000. This makes financing college education up front harder and harder for many students and their families.
To help make college education more affordable, a number of loans are available through the federal government and other financial institutions. Unsubsidized loans are just parts of them.
Unsubsidized Loan Basics
Unsubsidized loans are student loans which make it possible for students to finance an education when students are enrolled into a college or university. These loans have an interest rate which accrues as soon as they are disbursed to your student account at the school you are attending. Students can make interest payments while still in school. If they choose to repay after graduation, the accrued interest would get capitalized or added onto the balance of their loan.
Unsubsidized loans are available in a few types, while the major type is the Stafford loan which is part of the Direct Student Loan program. The loan of this type is administered by the Department of Education.To apply for an unsubsidized Stafford loan, you are required to complete the Free Application for Federal Student Aid (FAFSA). Additionally, you must be at least half-time enrollment at your school. There are also many banks, credit unions and other financial institutions that have several different unsubsidized loan options on offer.
It is relatively easy for students (even those who are considered high risk because of the financial condition of their family) to gain an unsubsidized loan. Many colleges and universities offer students assistance with finding unsubsidized loans and also with application process. Students who meet some type of criteria are usually offered a low interest rate. However, those “high-risk” students would carry a higher interest rate.
Difference Between Subsidized Loans and Unsubsidized Loans
When it comes to student loans, in addition to unsubsidized loans, subsidized loans are also important parts of them. Although they are fairly similar, there are still some striking differences between them.
The primary difference is the interest charges. With a subsidized loan, students don’t need to pay interest while in school. The interest is covered by the federal government during that time. However, after students graduate and their grace period is over, they are required to start repaying their loans and interest.
Unlike subsidized loans, unsubsidized loans get interest capitalized or added to the balance even when students are still in school. This means that students’ balance will likely be considerably more than what they initially borrowed by the time of graduation.
Another major difference between them is how much students are allowed to borrow each year. For a subsidized loan, there usually is a tight cap on how much students can borrow each year, usually depending on their specific situation and financial status.
Though unsubsidized loans also have a cap on it, they allow students to borrow more compared to subsidized loans. This means a student will be more likely to be able to afford the cost of attending a college or university. Usually, students can borrow around $4,000 to $5,000 more each year. So, when they have reached the cap on borrowing money through a subsidized loan, an unsubsidized loan is perhaps their only option.
For students who don’t need to borrow so much money, they may think subsidized loans. In fact, an unsubsidized loan may still be the best option for some students. This is especially true if the student’s grade point average is not high enough to meet the qualification for a subsidized loan. Additionally, students may not meet the conditions of financial need associated with a subsidized loan.
Are you planning to further your education but don’t have the money? Well, why not apply for a Stafford Loan? Stafford loans are loans from the federal government to cover personal higher education costs. These loans can be used to cover tuition fees and other costs related to attending a college such as costs for books, room and board.
The increasing cost of tuition makes a number of students unable to attend to a college each year. The U.S. government is certainly aware of this fact and thus offers a variety of student loans through the U.S. Department of Education. The Unsubsidized Stafford Loan is just part of the Direct Student Loan program which is administered by the U.S.