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A subsidized loan is one that is based on the financial need of a student. When a student loan is subsidized you will generally not have to pay a yearly interest rate when the student is still studying at a college.
One such student loan that is subsidized is Perkins student loans which are low interest loans that are for those students that have a high need. The financial aid officer at the institution you have selected will be able to tell you if you qualify.
The repayment of these loans can be spread across a 10 year period. Also the Perkins loan can be cancelled if the graduate is employed as a full time teacher in a low income area, a special education teacher or a math or science teacher in a school where there is a shortage of teachers.
With an unsubsidized loan the payments can be deferred until after graduation. An unsubsidized loan is not based on needs meaning that everyone can apply for this type of loan. The names of these types of loans differ but include:
- Stafford Loans – these loans have a reasonably low interest rate are capped at 8.25 percent. In the first year the maximum amount is $2625, the second year is $3500 and in the third and fourth years the maximum amount is $5500.
With this loan borrowers are able to have part or the entire loan subsidized which means the government will pay for the interest whilst the student is studying. The repayment of the loan will begin six months after graduation. A graduate or professional student can borrow $18500 per academic year.
- Federal PLUS Loans – this type of loan allows parents that don’t have an adverse credit history to borrow the full cost of an education for dependent undergraduate students. The education costs include tuition, room and board, books, transportation and other expenses.
The variable interest rates on PLUS Loans will range between 2 percent and 9 percent. The repayment of the interest and the principal loan will begin 90 days after the loan is fully disbursed to the school. These loans are not income sensitive, which means that the family’s income will not determine the eligibility of the loan.
- Private-Education Loans for Parents – these loans are for parents and are available at the banks, which mean they are not government backed. These loans will generally have variable rates that are calculated on a monthly or annual basis.
You are able to research the loans online for more detail or you can talk with the loan providers to find out the best route for a student loan.