A subsidized loan is a type of loan for undergraduates with financial struggles. This loan is determined by the student’s cost of attendance subtracted from their family contribution and other financial aid, like scholarships or grants. This type of undergraduate loan does not accumulate interest while students are still in school. Instead, the U.S. Department of Education covers the cost of interest on the student loan while they are still in school and throughout the deferment periods.
Subsidized loans are federal student loans given to undergraduate students to cover their financial needs. The school identifies and notifies undergraduate students who qualify for this loan after completion of the Free Application for Federal Student Aid form by students. Where you have filled out this form, it is important to confirm with your financial aid officer for any other paperwork required for you to submit to qualify for a loan.
However, it is important to be aware of how this loan works to help and make application and approval much easier for students. While this is so, this write-up contains insights into subsidized loans and how it works.
Subsidized Loan Terms
Subsidized loan repayment takes six after a student graduates, drops below half-time enrolment, or leaves school. This six-month grace period allows students to get financially stable, or get a job and be able to repay the loan after school. During this grace period, student borrowers will receive their repayment details from their loan servicer.
However, if you cannot afford the subsidized loan repayment, you can get in touch with your loan servicer and request a deferment or a loan modification to make payments more affordable.
How Much Subsidized Loans Can I Take?
How much you can borrow depends solely on different factors. These factors include what level you are in school, whether you are an independent or a dependent student, and the type of loan and loan terms you want. Knowing these can help you determine how much you should borrow to avoid borrowing more than you need.
Subsidized Loan Interest Rate?
Every lender includes interest rates in loans every borrower takes. An interest rate is a percentage charged by the lender to the borrower. It is also referred to as the percentage of the unpaid principal of the loan taken. However, it is important to be aware of how much interest rate you are charged on a loan.
While the student is in school, the federal government pays the interest rates included in the loan until the borrower graduates and passes the deferment period. While this is a benefit, it is not open to every student borrower, this is because it is a needs-based loan. Currently, federally subsidized loans maintain a fixed interest rate of 6.53%.
Subsidized Loan Qualification Requirements
Just like every other type of loan, you need to meet certain requirements to qualify and apply for subsidized loans. Students who meet the following requirements can apply for federal direct subsidized student loans:
- Eligible non-citizens or U.S. citizens.
- Outstanding academic success.
- No default on any federal loans taken.
- Half-time enrollment at an eligible school.
- Ownership of a valid Social Security Number.
- Ownership of a high school diploma.
Unfortunately, these requirements only apply to undergraduate students who require financial needs. Graduate students can not apply for this loan.
How to Apply for Subsidized Loans
As long as you are an eligible undergraduate student, applying for a subsidized loan is very easy to do. Online through the website, you can follow the below steps to apply and qualify for this loan.
- Visit the studentaid.gov website
- On this website, fill out the Free Application for Federal Student Aid form.
- On this form, fill in every information required and attach documents if there is any required.
- After this, click submit and follow the other steps required.
After this, the school will notify you of your loan application’s approval status. Where there is a delay, it is advisable to visit your loan financial advisor for any additional documents required.
Is Subsidized Loan Worth It?
In summary, subsidized loans are worth getting. This loan simplifies meeting the needs of undergraduate students. It makes loan payments and interest rates more affordable for borrowers because it does not accumulate while the student is still in school.
