Subsidized vs Unsubsidized: How Student Loans Work

Now that the college bill is due, it’s time to talk about the difference between Subsidized vs Unsubsidized student loans. 

If you filled out the FAFSA, you’re offered $5,500 in a direct loan that is often called the “Stafford Loan”, and based on need $3,500 of that may be subsidized. The difference between the original $5,500 and the portion that is subsidized is unsubsidized. 

The college will take both numbers and divide them equally by the number of terms, so you don’t spend all on one term versus the others. You can choose to borrow all,  some, or none of those dollars, but for the subsidized loan there are no payments due for all of college and no interest until after college. For the unsubsidized portion, you are responsible for interest-only payments during college and for six months after. 

If you choose to defer, you’ll be paying a lot more than you borrowed. Because of the pandemic, there is a payment holiday and it’s not certain when these bills will become due. It’s better to always assume that if you’re borrowing it, you’ll have to pay for it eventually. 

If you need help with Subsidized vs Unsubsidized student loans, don’t hesitate to reach out to us at 732-556-8220. We are here to help.