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Subsidized Loan

A subsidized loan is one of the many types of financial aids that are offered by the government. These loans are granted to students who want to pursue college programs but do not have the financial means for it. Subsidized loans are granted on the basis of financial need. The concerned department assess if an applicant has financial need according to the information provided in Free Application for Federal Student Aid (FAFSA). Compared to other types of loans offered by the federal government, these loans have more benefits for the borrowers. This is why most students prefer to apply for a subsidized loan.

Features of Subsidized Student Loans
Subsidized loans have a number of distinctive features. Firstly, they are granted on the basis of need. The most distinctive and beneficial thing about these loans is that the federal government pays the interest on these funds while the borrowers are in a school. The rate of interest of these loans in lower compared to other kinds of loans. Also, federal subsidized loan programs have a more flexible repayment plan than other kinds of financial aids. The amount a student can avail through this loan program depends on a number of factors such as a borrower's year in school, if he/she is dependent or independent student and more. Availing direct subsidized loan enables students to get cover for tuition, accommodation, traveling and other related expenses.

Types of Subsidized Student Loans
A subsidized loan may fall into two categories: Federal Perkins loans and the Subsidized Stafford loan. Subsidized Stafford loans are offered to students who demonstrate financial need. Although Perkins loans are also offered to students on the basis of need but they are only given to the applicants who demonstrate exceptional need. The rate of interest on subsidized Perkins Loans is 5%. Students can repay these loans 9 months after graduating. The rate of interest in subsidized Stafford loans, on the other hand, is 3.4%. The borrowers can start returning the amount 6 months after completing their studies.

Subsidized student loans have been created by the government in an effort to make quality education accessible to the masses. The government pays the interest being incurred on the loan while the borrower (student or the parents) is enrolled in a certified college or university. This means that all the interest being added to a subsidized loan is being paid off by the government. The two most common subsidized loans are Stafford and Perkins loans. The interest on these is added to its principle amount while the student is studying. Actual payments on these kinds of loans start after graduation or withdrawal.


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Q:Can you name some types of subsidized school loans?

A:Some different types of subsidized school loans include direct subsidized loans and federal subsidized loans. In private subsidized loans there is Staford loan. Staford loans are awarded to the individuals who are able to justify their financial need and Perkins federal loans have an interest rate of 5% and repayment process starts nine months after graduation.

Q:How to apply for subsidized student loans?

A:Subsidized students loans offer students a number of advantages. Students can apply for subsidized loans by filling out the FAFSA application form. Eligibility criterion for this loan requires students to be U.S. nationals or possess a valid resident permit. These loans are on based on credit and students are not required to pay interest or installments when enrolled at college.

Q:What is the eligibility criterion for direct subsidized loans?

A:The eligibility criterion for federal direct subsidized loan is: (i) have a financial need (ii) have a high school diploma or GED (iii) enlisted in a degree program (iv) be a U.S national and have a valid social security number (v) certify by signing a FAFSA that you are not in default of any federal loans.

Q:How do you receive federal direct subsidized loan?

A:Typically, when you qualify for a federal direct subsidized loan, it first goes to the institute or college you are studying in. The college pays off the tuition fee for you, your room expenses and other educational expenses. The amount remaining is returned to the student to spend on other education related expenses.

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