Definition of “Subsidized vs Unsubsidized Student Loans”
Student loans can either be classified as subsidized or unsubsidized. Subsidized student loans are loans for which the federal government pays the interest while the student is in school, during the grace period, and during periods of deferment. Unsubsidized student loans, on the other hand, are loans that accrue interest from the time they are disbursed until they are paid off.
Subsidized vs. unsubsidized loans are two main types of federal student loans. Subsidized loans are available to students with financial need, while unsubsidized loans are available to all students regardless of financial need. The main difference between the two types of loans is that the government pays the interest on subsidized loans while the student is in school and during grace periods and deferment periods. For unsubsidized loans, the student is responsible for paying the interest that accrues during all periods.
Subsidized loans have a lower interest rate than unsubsidized loans. For the 2022-2023 school year, the interest rate for subsidized loans is 3.73%, while the interest rate for unsubsidized loans is 4.30%. Both subsidized and unsubsidized loans have a loan fee of 1.059%, which is deducted from the loan amount before the loan is disbursed.