Subsidized Student Loans for College Funding

For students with significant financial need, the federal government offers Stafford Subsidized Loans. When a loan is subsidized, the government pays the interest on the loan while the student is in school and through the six-month grace period. If the recipient of the loans enters a period of loan deferment later on, the government also pays the interest on the loan at that time. When you consider that interest is the cost of borrowing money, it is clear that the subsidized loans offer a real benefit.

This becomes more clear when you look at private loans. Private loans are  always unsubsidized. Some programs require that students begin repaying the interest on the loan from the time the loan is disbursed, while others allow the borrower to defer interest repayment until after graduation and roll the interest into the principal.

How Do You Get a Subsidized Loan?

The only way to qualify for federal student aid, subsidized or unsubsidized, is to file the Free Application for Federal Student Aid (FAFSA). Once you have filed FAFSA you do not need to do anything further to apply for federal aid, although you should be hard at work tracking down other sources of funding, such as state loans and grants and scholarships. Students and their families should not try to second-guess what aid they can receive – if you do not file FAFSA, you will not be in the running for a wealth of opportunities. It is estimated that eight million college-bound students do not file FAFSA, and that of those eight million, six million would qualify for low-interest loans and two million would qualify for Pell Grants, which is free money.