If you have one or more subsidized federal student loans, you know that the financial aid office has requirements on what you can and cannot borrow. For example, you are not allowed to borrow more than what you have already paid. You may also not borrow money if you have outstanding loans from other institutions or credit card companies. If you fall into any of these categories, there is a good chance that you are eligible for federal student loan forgiveness. This can save you hundreds of dollars per year in interest charges.
When a student graduates, their subsidized federal student loans are usually due. Unfortunately, many graduates fall behind on their payments. They are then considered eligible for federal student loan forgiveness. The government forgives their loans if the borrower has not been able to repay them for five years. This five-year waiting period starts when the student is enrolled in college.
It is important to remember that federal student loan forgiveness does not apply to subsidized loans only. There are exceptions to this rule for students who are in the early beginning of their careers or students who otherwise do not qualify for federal student loan forgiveness. In addition, subsidized and unsubsidized student loans do not need to be repaid at any time. There is a certain time limit to repay the loan and cannot start later than the fifth year after graduation.
However, it should be noted that not all federal student loans are subsidized. At times, federal loans are unsubsidized. For example, Stafford loans are subsidized but not subsidized. Many students mistakenly think that they are receiving subsidized student loans when in fact they are not. A student may have a subsidized loan and think that he or she are receiving unsubsidized student loan money. When the time rolls around to repay the loan the student may find out that the unsubsidized loan was more than the subsidized loan and therefore the loan amount that they had to repay was more than the unsubsidized loan.
Federal student loans are not the only ones that are subsidized. Many private student loans are subsidized as well. The type of financial aid that the student receives depends on whether they are a subsidized or unsubsidized student. If the student receives federal aid, they will have different type of income and may not receive a subsidized loan.
The major difference between subsidized and unsubsidized student loans is the level of government assistance that is provided. Subsidized student loans are made available based on financial need. An individual student may receive an unsubsidized student loan, however they must first qualify for a subsidized loan. An individual student’s family may qualify for either type of student loans. Once a student qualifies for either type of student loan, the government will provide the funding for the student to pay for his or her tuition and other college related costs.
As a student borrower you should know what type of student loan you will qualify for. For students who do not qualify for federal student loans there are still options available to fund your education. There are also many scholarships that are specifically made for college students that need financial aid.
There are many benefits of getting a subsidized student loan. A student can get one at a lower interest rate as compared to unsubsidized student loans. The repayment terms are generally much shorter for subsidized student loans. This means that in five years or less, the student will not have to repay his or her loan. The payments will generally be affordable and the student will be able to manage the debt. As unsubsidized student loans generally have much higher monthly payments, a student will have to seek financing with an extended repayment period in order to afford his or her college education.