Subsidized Student Loans Explained

When you are trying to take the next step in advancing your education, how you actually fund that education can be the furthest thing from your mind. Many financial aid departments will tell you that you are getting a variety of funding, including subsidized student loans. Not knowing what they are talking about, but understanding that you must sign on the dotted line to attend school, you simply nod your head and agree to the funding terms.

Unfortunately, most financial aid departments don't attempt to go into great detail when helping you arrange for your education. Their one and only goal is to get you the funding you need so that they can earn more tuition for their school. They are not concerned with your needs, what interest you may pay, or what type of loans you get.

Subsidized student loans are the best type of loan to get. These loans do not have to be repaid until you graduate school. Additionally, you do not pay any interest until you have graduated, instead the government pays it for you. Sounds great, but the problem is that these loans are harder to obtain than unsubsidized loans and you usually won't get accepted for very large amounts. In other words, don't expect to receive enough subsidized funding to cover all of your college expenses - you'll have to use a combination of both types of federal student loans to cover all of your expenses.

All of your student loans will likely come with an agreement that as long as you are in school you do not have to make payments. However, not all of these are subsidized loans. Many of these loans are unsubsidized loans placed on an academic deferment. With these loans you rack up interest even while you are in school. The only way to keep these loans in check is to pay your interest monthly throughout your academic career.

Another thing that may confuse you is consolidation. Subsidized student loans cannot be consolidated until you graduate school. However, since you do not have to pay on them at all and you do not accrue interest until you graduate, you really have no need to consolidate them.

One way you can tell if a loan is unsubsidized is whether or not a credit check was required for the loan. Most subsidized student loans do not require a credit check, because they are federally backed and loaned through federal programs. However, unsubsidized loans may also be granted without a credit check, although interest rates on these loans may be higher.

The best way to tell if a loan is unsubsidized or subsidized is how much you can borrow. There is a fairly strict cap on how much you can borrow per year in subsidized loans. As a result, most people end up with a combination of the two loan types. This is where the confusion usually comes in. However, if you know these facts about subsidized student loans you will have a fairly good understanding of the breakdown of your student loan debt.

Joe Eitel is an accomplished freelance writer who is an expert in the student loan consolidation field. If you'd like to learn more about subsidized student loans or how student loan consolidation works, visit: Consolidating Student Loans