On the other hand, with subsidized student loans, if you borrow $5,000, that’s exactly what you’ll owe when your repayment period starts. In short, subsidized student loans help keep your debts at the same level while you’re in school.
It’s also worth noting that if you eventually request a student loan deferment (for example, if you become unemployed and can’t make payments), the government will cover the interest on subsidized loans during these times, as well. With unsubsidized loans, interest continues to accrue during deferments.
How to qualify for a subsidized student loan
To qualify for subsidized (or unsubsidized) loans, you need to be enrolled at least half-time in a degree or certificate program at a qualifying college or university. You also need to fill out the Free Application for Federal Student Aid (FAFSA), which provides the information your school needs to determine if you’re eligible for loans. You also must be an undergraduate student. Graduate students were eligible for subsidized loans until July 2012.
Additionally, subsidized student loans are need-based, which means that the borrower must have a financial need to qualify.
Unfortunately, there’s no single definition of financial need. For purposes of subsidized student loans, the determination of what types of loans you qualify for is made by your school. The idea is that the cost of attending some schools is less than others, so the thresholds of financial need differ from school to school.
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