Student Loans 411: Unsubsidized Stafford Loans
Chances are that if you are in college, you will have to take out loans at some point. While there are many financial opportunities available to assist you with your tuition, the most common form of financial aid in the United States is Stafford Loans. These loans are awarded based on your completion of the FAFSA and can be subsidized or unsubsidized. What is the difference between the two? Here, we will look at unsubsidized Stafford loans.
An unsubsidized Stafford loan is a loan that is awarded based on your responses to the FAFSA. These loans are not based on financial need and because of this, you are charged interest from the time these loans are taken. This interest is added to the overall amount you borrow and is capitalized quarterly.
Because a loan is money you have to pay back, you have the option of paying your interest quarterly. While it is not required that you pay it at this time, if you can swing it financially, it is advisable. Here’s why: If, for example, your interest on your unsubsidized loan is $100.00 U.S. every three months and you are in school for four years, you will wind up owing at least $1200.00 more at the end of college. This is a large sum of money. If, however, you choose to pay the $100.00 every three months, you potentially save yourself a lot of stress. Even though Stafford Loans have a six month grace period, unsubsidized loans still accrue interest during the deferment. Pay your interest as you go, and you save quite a bit of money!
To recap: an unsubsidized Stafford loan is not based on financial need and is awarded based on your responses to the FAFSA. You do have to pay this money back and interest does accrue starting the moment you sign the promissory note.
