December 7, 2022

Unitranche

Supportive Business Potential

Subsidized vs. Unsubsidized Loans: Which loan should you choose?

College students looking to get a degree, often take out student loans to help them cover their expenses, and while many opt to borrow money from private lenders, around 43 million students currently have federal student loan debt.

Subsidized or unsubsidized student loan?

Those students taking out federal student loans will have the option to get them subsidized or unsubsidized, with both of them offering numerous benefits like flexibility in the repayment options and having low interest rates among others.

The main difference between the two types of federal student loans is that subsidized ones are only available for undergraduate students while the unsubsidized one is available for undergraduate, graduate and professional degree students.

Subsidized and unsubsidized student loans must be repaid with interest, but on subsidized loans the government will take care of some of the interest payments.

Should I choose a subsidized or unsubsidized loan?

Subsidized loans aren’t necessarily better that unsubsidized student loans, but they offer a smaller interest rate for those who take them out.

This is due to the government paying the interest generated on the loans while the student is in school and up to six months after his graduation, therefore only undergraduate students with provable financial need can apply.

A borrower must remember that regardless of if student loan is subsidized or unsubsidized it must be repayed with interest eventually, so evaluating the repayment options is key to find the best fit for every budget.