Education Department pays interest. Interest accrues. Who can borrow. Undergraduate students only. Subsidized vs. Who can borrow loans. Maximum eligibility period. Loan qualifications. Loan limits. Interest rates. How interest accrues on subsidized and unsubsidized loans. While in school. Grace period. During deferment. How to get subsidized and unsubsidized loans. Taking out federal loans vs. College October 30, Kiley Thompson.
Keep these definitions in mind from the beginning. The difference comes down to who is paying the interest that accrues on the loan from the moment you get the money. A subsidized loan is a type of federal student loan. Once you start repayment, the government stops paying on that interest, and your repayment amount includes the original amount of the loan, and the interest, accruing from that moment.
Another type of federal loan is an unsubsidized loan. With an unsubsidized loan, you are responsible for the interest from the moment the loan money is disbursed into your account. With subsidized student loans, as long as you're in school at least half time, you don't owe anything on your loans. After you leave school, your loan servicer will contact you and let you know when your first payment is due and how to pay.
It's best to start paying the loans back as soon as possible and pay more than the minimum if you can. If you make minimum payments, it can take many years to be free of your loans. If you're able to contribute more, you'll be done with them sooner—and you can reduce the overall cost of the loan since you won't be paying interest as long. If you want to make a larger payment, let your loan servicer know you want that extra amount applied to the current month's payment so they don't inadvertently add it to the next month's payment.
Some students aren't able to get by on subsidized loans alone and have to also take out unsubsidized federal loans or private loans. If you have multiple student loans, determine which have the largest balances and the highest interest rates. Anytime you are able to pay more than the minimum, put that extra money toward these more expensive loans since it will save you the most money over time.
Also, be aware that federal loans have several different repayment plans to choose from. While yours may come with one automatically, you can change plans for free at any time. Contact your loan servicer to find out which plan would work best for you or to change your plan. Extra Credit Taking out student loans can help you establish credit history, and making on-time loan repayments can improve your credit over time.
Keeping an eye on your credit report, such as through Experian's free credit monitoring service , will help you track your progress as you pay back your loan, and will alert you to any changes in your credit file. The purpose of this question submission tool is to provide general education on credit reporting.
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If you need more money, you can also borrow with unsubsidized debt. You eventually need to repay most loans. That process might begin you finish school and begin working, or when you sell a home you bought with subsidized debt. If you have loans that are not subsidized, you may have several options for handling interest charges. The choice you make affects the total amount you pay over your lifetime. The safest option, if you can afford it, is to pay interest charges as they hit your account.
Paying interest charges each month also enables you to minimize the total cost of your education debt. You may be able to have interest charges added to your loan balance. While that approach seems easy to manage today, you end up with higher costs and higher monthly payments in the future.
Read more about capitalizing interest on your loans. You might use a different strategy—and avoid paying interest—if you're confident that you'll qualify for loan forgiveness. However, that approach is risky.
You can't be certain that your loans will be forgiven until it actually happens. Department of Education. Local Housing Solutions. Actively scan device characteristics for identification. Use precise geolocation data.
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