What's the difference between subsidized & unsubsized loans?

Question

What's the difference between subsidized & unsubsized loans?

Answer 1

Subsidized is a need based loan, therefore because you were identified as a student with financial need, the gov't is going to pay the interest on this loan for you, as long as you are enrolled at least half-time in school. Once you start repayment, you will become responsible for the interest.

Unsubsidized, is a non-need based loan, and the interest acrues at a fixed rate of 6.8% the whole time. You can choose pay the interest as you go along (the best choice if possible) or have the interest deferred until you graduate. Be aware, that the interest is capitalized each year. So, if you borrow $2000 this year, the interest would be about $136, once this is capitalized, you will start paying interest on $2136, then they will capitalize the interest on that, and so on.

Your school will let you know which you qualify for, sometimes you get a combination of the 2.