Loans are a hard, cold fact for most college students. Most students today do not have the financial means to put themselves through college and many do not have families who are in a position to help them. Because of this, more and more students are relying on loans awarded based on their responses to the FAFSA (Free Application For Student Aid). Loans awarded based on these responses are known as Stafford loans and there are two types. The first is unsubsidized, which we have already explained. The second type is subsidized, which we will look at further.
Subsidized Stafford loans are monies awarded to you as a student based on your personal financial need. This need is calculated from your responses to the FAFSA and take into account your current income level, your parents’ income (if you are under 24), the cost of the college or university you are attending, and the cost of living. Because these loans are based on financial need, interest is not charged until after your deferment period is over.
While subsidized Stafford loans are ideal, usually the amount available to you is less than what is available to you as unsubsidized. If you are able, however, it is better to accept more in subsidized loans than unsubsidized loans for the simple fact that you won’t have to worry about interest capitalizing while you’re in school.
To recap: Subsidized Stafford loans are loans granted based on financial need as determined through your responses to the FAFSA. Interest does not begin to accrue on these loans until after your six month deferment period. After this time, interest begins to accrue. Because these are basically interest-free loans, they are the best option as far as monies you have to pay back.