Among its “tips for deciphering financial-aid letters”, the Wall Street Journal includes information that can be useful in evaluating student loan offers.
Difference between subsidized and unsubsidized federal student loans
The federal government pays interest charges on federally subsidized loans while a student is in school, for example, which can help borrowers substantially. Such loans are generally given to students who demonstrate some kind of financial need, but students don’t need to come from low-income families to qualify.
Just over 34% of undergraduates with family income of at least $100,000 received subsidized Stafford loans at colleges where total annual costs, including tuition and room and board, were at least $30,000 in 2011-12, according to an analysis by Edvisors of the most recent federal data available. Just 12% of such students received the loans when attending less-expensive colleges.
Unsubsidized federal loans can be less desirable because interest accrues while the student is in school, which—if unpaid—could result in a significantly larger balance by the time the student graduates. Some colleges don’t include unsubsidized loans in financial-aid offers.
Colleges and universities also may offer their own loans, which may or not be preferable. Compare and contrast the terms on offer, including the interest rate and when interest charges begin to boost the outstanding balance.
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