New Jersey Student Loan Debt Lawyer Explains the Different Types of Student Loans

The U.S. Department of Education’s Stafford student loan program has subsidized and unsubsidized loans, and as a New Jersey student loan debt lawyer, I can explain the difference between the two loan types. These differences affect eligibility, use (undergraduate or graduate school), and interest accumulation.

Difference Between Subsidized and Unsubsidized Federal Student Loans

Some key differences between subsidized and unsubsidized federal student loans are:

  • Eligibility. Subsidized loans are available only to those in financial need. This means the school determines the amount you can borrow and cannot exceed your need. Financial need is generally the difference between the cost of attendance and your Expected Family Contribution. With unsubsidized loans, you do not have to demonstrate need.
  • Use. Subsidized loans are only available for undergraduate school, while graduate students can use unsubsidized loans.
  • Interest Accumulation. With subsidized loans, the U.S. Department of Education pays the interest during specific periods, while with unsubsidized loans, you pay the interest.

Paying Interest on Student Loans

Should you be eligible for a subsidized loan, the U.S. Department of Education will cover the interest on your loan while you are enrolled in school at least on a half-time basis. This interest payment continues through a six-month grace period following your departure from school. Additionally, the government will pay the interest on your loan during any period of deferment. With an unsubsidized loan, the interest accumulates during these periods and then capitalizes (added to the loan principal) after the period.  

Obtaining Information About Federal Financial Aid

If you want more information about federal financial aid for college, download my free book, Applying for Federal Financial Aid: The Definitive Guide for Students and Parents. For more information about what happens after you graduate, get my free book, I Graduated; Now What? A Guide to Dealing with Your Student Loans.

You can also access the latest news on student loans, get answers to Frequently Asked Questions, and read articles in my Library. Continue to educate yourself as you go through the process of making smart decisions about college financing.

Steven J. Richardson
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Bankruptcy, Collections, Student Loan, DUI and Traffic Court attorney in Woodbury, NJ.