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Federal Stafford Loans are the cornerstone of many financial aid packages. While they always have to be paid back, they offer low interest rates, deferment of payment while enrolled in school, and flexible repayment plans once you graduate. Stafford Loans are available in both subsidized and unsubsidized incarnations. If you’re wondering about the difference between subsidized and unsubsidized Stafford Loans, the table below should answer many of your questions.
|
Subsidized Stafford Loan |
Unsubsidized Stafford Loan |
Type of Financial Aid |
Federal student aid loan |
Federal student aid loan |
Application Process |
Completion of FAFSA application. |
Completion of FAFSA application. |
How are Awards Determined? |
Awarded to students based on demonstrated financial need as shown by the EFC number calculated from information in the FAFSA application. |
Demonstrated financial need is not required. Award is based upon education cost minus any subsidized amount awarded. |
How much can I borrow? |
Between $3,500 and $8,500 per year, depending on grade level. |
Between $5,500 to $20,500 minus any subsidized amount awarded. Maximum amount awarded is based upon grade level and dependency status. |
Interest Rates |
The current interest rate, according to studentaid.ed.gov, is 4.5 percent for undergraduate students and 6.8 percent for graduate students. The government pays the interest while you are in school and during the post-graduation deferment period. |
The current interest rate, according to studentaid.ed.gov, is 6.8 percent. The student is responsible for all interest on the loan while enrolled in school and during the post-graduation deferment period. Payment of interest accrued while in school can be deferred until graduation. |
Repayment Options |
The standard repayment term is ten years. You can extend repayment through deferment or loan consolidation. Other repayment options include a graduated repayment plan, an income based repayment plan and an extended repayment plan for those with loans totaling more than $30,000. |
The standard repayment term is ten years. You can extend repayment through deferment or loan consolidation. Other repayment options include a graduated repayment plan, an income based repayment plan and an extended repayment plan for those with loans totaling more than $30,000. |
Enrollment Requirement |
Student must be enrolled at least half-time in an undergraduate or graduate program at a college or university that participates in the Federal Family Education Loan Program. |
Student must be enrolled at least half-time in an undergraduate or graduate program at a college or university that participates in the Federal Family Education Loan Program. |
Other Requirements |
Student must be a U.S. citizen or national, a permanent U.S. resident, or an eligible non-citizen.
Student must not be in default on any education loan or owe a refund on an educational grant. |
Student must be a U.S. citizen or national, a permanent U.S. resident, or an eligible non-citizen.
Student must not be in default on any education loan or owe a refund on an educational grant. |
As you can see, the main differences between subsidized and unsubsidized Stafford Loans are how the award is determined, how much a student can borrow, the interest rate, and whether or not the interest is paid by the government or the student while in school. While lower interest rates and subsidized interest payments are a great thing for those who qualify, in any subsidized vs unsubsidized Stafford Loans situation, every student will come out a winner.
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