Unsubsidized Stafford Loans

No doubt you’ve heard the term “Stafford Loan” more than once in the past three years. If you need money for college, you’ve probably heard it more than a hundred times. But do you know that there is more than one type of Stafford Loan?

That’s right. Subsidized and unsubsidized and if you’re feeling the squeeze of your EFC (Expected Family Contribution), the latter may be the way to go.

What is an unsubsidized Stafford Loan? The unsubsidized loan is the answer to the prayers of every student who ever thought aloud, “They won’t give me a grant because my EFC is too high…and I didn’t get any scholarships…but my parents can’t contribute to college. What do I do know?” Unsubsidized loans are for students who don’t have a great enough need to qualify for subsidized loans, grants and need-based scholarships.

What is the difference between a subsidized loan and an unsubsidized loan? There are several differences between the two types of Stafford Loans, but the greatest are these: a subsidized loan defers payment and interest-accrual until after graduation and requires FAFSA-determined need. An unsubsidized loan can defer payments until graduation, but not interest (you’ll accrue interest while in school, but can defer payment until after graduation) and is available to everyone.

I heard that with unsubsidized loans I may be able to borrow more if I meet certain criteria but what are the criteria? The only criterion for being able to borrow more money on an unsubsidized loan is to be classified as independent on your FAFSA. Being classified as independent can give you the opportunity to borrow more than twice as much money as those students classified as dependents.

What if I can pay for college costs but not for books, room and board? While unsubsidized loans do have caps, you can borrow everything you qualify for and spend it as you need to—for books, dorms or a student apartment, food, bills, etc. But remember, you do have to pay it back with interest—be wise, sparky.

Do I have to pass a credit check to get an unsubsidized student loan? No. Any past bad debts will not count against you. But remember, your payment history on your student loan may appear on your credit report. So remember to keep your nose and your payment history clean and pristine.

What is the interest rate for unsubsidized loans? The interest rate for unsubsidized loans, just like for subsidized loans, changes every year but can never be higher than 8.5%. Plus, never forget the advantage of consolidating your loans after you graduate college—if you have more than one loan and you consolidate, you may have the opportunity to reduce your interest rate before it hits you.
While a subsidized loan should always be your first choice and unsubsidized loans are reminiscent of bad prom dates, any additional assistance with the soaring costs of college should never be left on the dance floor during the final waltz.