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What is the difference between subsidized & unsubsidized direct or Stafford loans?

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Transcripts

Host: What is the difference between the subsidized and unsubsidized direct or Stafford loans?

Brad Barnett: Yeah, when you are looking at subsidized versus unsubsidized, Stafford loans or direct loans, I will them, Stafford loans for the purposes of this, they are basically one and the same as we have discussed in an earlier question.

You are really talking about who is responsible for the interest, while the student is in school and or deferment. For example, if you take out a $3500 subsidized Stafford loan during your Freshman year, then you don t get charged any interest on that loan, until you go into repayment which is six months after you stop going to school that will least half time.

We hope that of course, is graduation so, at that point you would start paying back the $ 3500 plus whatever interest accrues on the loan from that point forward. On an unsubsidized Stafford loan, it's the reverse. If you take out a $3500 loan your first year, what happens is, interest begins accruing immediately. You are responsible for that interest during your school carrier.

You can make interest only loan payments and keep that $3500 at 3500 or you can tell the lender, I don t want to make interest payments, please add that into my loan and they will do that for you. But what that means then is when you get out of school, you are paying interest on top of the interest. So, the difference is who is responsible for the interest, while you are in school.

Expert: Brad Barnett

Brad received his Bachelor of Science degree from Southern Arkansas University, with a major in Psychology and a minor in Business. He furthered his education by graduating from the Medical College of Virginia at Virginia Commonwealth University with a Master of Science degree in Rehabilitation Counseling, specializing in Mental Health. He has been involved in the financial aid and/or rehabilitation More »