Subsidized loans are student loans that provide interest benefits while the student is attending an education institution as well as selected time periods after the student leaves the institution. The federal government pays the interest on a subsidized loan during the time the student remains in school and also during the grace period that follows graduation or termination of attendance. A subsidized loan may also be eligible for a deferment period in some cases.
Students find this type of loan can ease financial burdens while pursuing a degree. With unsubsidized loans, the student is still responsible for all the interest payments, usually beginning at the time of acceptance into the loan program. Since the federal government takes care of the interest payments before the repayment period commences, a subsidized loan makes it easier for the student to focus on studies and have one less financial issue to handle.
While there are a number of different programs that offer student loans, the subsidized variety must meet criteria established by the federal government. There are several different types of loans that are subsidized, making it possible for students in several different income brackets to apply for this form of financial aid. Two of the most common examples of this type of loan are the Subsidized Stafford Loan and the Perkins Loan.
By contrast, an unsubsidized loan is more or less a standard loan arrangement, although some programs may provide flexible repayment terms. There are no breaks on the payment of interest, and it is not unusual for this type of loan to at least require the interest on the loan be repaid on a regular schedule, even if payment of the principal is deferred until after graduation.
For students who can qualify for a subsidized loan, the repayment terms provide not only less financial worries while in school. There is also usually a six month grace period after graduation before payments must begin. In some instances, the structure of the loan will even allow additional deferment periods that provide additional time for the graduate to settle into a job and begin to make regular payments.