Students may be eligible to receive subsidized and unsubsidized loans based on their financial need.
Subsidized Loans:
Direct subsidized student loans are more favorable than unsubsidized student loans because the government kicks in to pay the interest during applicable periods.
The Department of Education pays the interest on a subsidized loans while:
- The student is in school at least half-time (six credit hours per semester or more);
- The first six months after the student leaves school (referred to as a grace period), and
- During a period of deferment (a postponement of loan payments).
Unsubsidized Stafford Loans:
Unsubsidized loans are available to undergraduate and graduate students with no requirement to demonstrate financial need. The school determines the amount the student can borrow based on the “cost of attendance” and other financial aid received.
The student is responsible for paying the interest on all unsubsidized loans during all periods.
If a borrower does not to pay the interest while in school and during grace periods and deferment or forbearance periods, the interest will accrue accumulate and be capitalized adding it to the principal of the loan.