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interest subsidy

When you borrow an education loan, you promise to repay the amount you borrow, plus interest. This is how all loans work.

However, education loans have special characteristics that make them different from other types of loans.

Subsidized education loans (such as subsidized Stafford Loans) are interest-free while you’re enrolled in college, during the grace period after college, and during deferment periods. This interest-free period saves you significant amounts of money in the long run.

Not all education loans are subsidized, however. Unsubsidized loans (such as unsubsidized Stafford Loans and PLUS loans) start accruing interest the day the loan money is sent to the school. This is the same way regular consumer loans work; they accrue interest right away, too.

Whether an education loan is subsidized or not depends on your family's financial circumstances. Eligibility is determined during the financial aid process.



HOW FEDERAL EDUCATION LOANS WORK
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