Question on Student Loans (Subsidized versus Unsubsidized)

Ardor

So I got my FAFSA done and have some student aid I can claim.

Between company reimbursement and subsidized loans, I can handle the annual payment. However, the up front cost is something I may have a slight issue with. So I was wondering how the unsubsidized loans work exactly.

I'm guessing they need to be paid off as a normal loan with interest, but a help page mentioned that I could defer the interest while enrolled in school.

Is this a good option to get the unsubsidized loan to help cover some other school expenses up to and including the first semester's payments?

Any idea how long the loans typically go for when unsubsidized?

Thanks for your time and help.

Daenris

Depends entirely on the loan provider. I believe my unsubsidized loans are 15 or 20 years, with an extended repayment option to shift that to 25-30.

The interest rate will be higher than your subsidized loans.

Yes, you should be able to defer payments while in school -- though they will usually have a cutoff both for how long you can defer, and for when you're considered in school, because some places won't defer if you're not enrolled in school at least half-time or so.

You may also have the option of doing interest-only payments while in school -- which if you can afford it is definitely a good idea as it means that interest won't be piling up the whole time.

PeekingDuck

• Subsidized loans are awarded on the basis of financial need. You won't be charged any interest before you begin repaying the loan because the federal government subsidizes the interest during this time.
  
• Unsubsidized loans charge interest from the time the money is first disbursed until it is paid in full. The interest is capitalized, meaning that you pay interest on any interest that has already accrued. One way to minimize how much interest accrues is to pay the interest as it accumulates.

http://www.csus.edu/sfsc-ymm/03_student_loans/sub_and_unsub.html

Ardor

Awesome, thanks for the help you two. I'll look over my finances and figure out the best path knownig better what I am getting myself into.

Thanatos

It's worth noting that until it's capitalized (rolled into the principle), interest paid on unsubsidized student loans is tax-deductible. This is great, and generally they have much lower interest rates than most other loans.