Subsidized Student Loans

The student loan which the interest payments are subsidized is called A Subsidized Student Loan. In general terms, there is no interest payment for the student during the schooling time. There are no principle payments until after leaving school.

Definition:

The government actually pays the interest of a subsidized student loan while a student remains enrolled in college or university. This means that any interest that would have been added to a subsidized loan balance is essentially erased by the government.

Subsidized loans are often confused with Student loans that are in deferment. Throughout the student’s education career, these loans still have the interest added to them, but until after graduation or withdrawal no payments are due.

Throughout their college education, subsidized loans are generally reserved for student demonstrating financial need ongoing basis.

“Stafford” and “Perkins” loans are the most common Subsidized Student Loans.

The best and first choice for students looking to borrow money for education is The Subsidized Stafford Loan.

The Benefits of a Subsidized Stafford Loan

Low fixed interest rate, as low as 4.50%
No payments while enrolled in school or in deferment.
Acceptance not based on credit.

Eligible for a Subsidized Stafford Loan

In order to be eligible for the subsidized Stafford loan, the following qualifications must meet by the applicant.

US citizen or eligible non-citizen.
Enrolled half-time more in an accredited academic program.
Have completed FAFSA.
Have completed the high school or equivalent.
Not in default or delinquent on any existing federal loan.

Through the completion of the “FAFSA” student must show that they are severely lacking in adequate funding for college or university attendance, based on a low EFC (Expected Family Contribution).

No credit check is required to apply for Stafford Loan. Therefore student can prove independence from a parent may be eligible that are without credit history; however, while parents with that credit history still eligible, having a high income disqualifies their student for subsidized student loans.

Whenever you want, you can pay-off your federal loan. Your financial aid grant-wise for the following year will depend on income and assets available.

Students’ parents do not cosing subsidized federal loans. Cosigners are not required (or allow) because federal loans are solely taken out in the students’ name. If student loan went in to default, the his parents’ credit has taken a hit, if they cosigned a private loan. Especially since the student paid loan off, parents’ credit is not necessarily ruined. Unfortunately this was a risk that students’ parents accepted when they cosigned the loan. Students’ parents should have been contacted for parents, if students’ loan went into default. (Because they were just as responsible for the payments as student was) Even if their credit took a hit, it can be built up again pretty.