What Is an Unsubsidized Stafford Loan?

Stafford loans are one of the most popular types of loans available to college students. If you’re thinking about taking out a Stafford loan, you’ll want to learn about the different types of Stafford loans first. In this article, we’ll explain what an unsubsidized Stafford loan is and how it works.

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What is an Unsubsidized Stafford Loan?

An unsubsidized Stafford Loan is a federal student loan that is not need-based. The U.S. Department of Education (DOE) does not pay the interest on unsubsidized Stafford Loans while the borrower is enrolled in school at least half-time, during the six-month grace period, or during deferment or forbearance periods. Interest accrues on unsubsidized Stafford Loans from the time the loan is first disbursed.

Stafford Loans first disbursed on or after July 1, 1993, are unsubsidized regardless of when the borrower applies for the loan. For loans first disbursed prior to July 1, 1993, Stafford Loans were subsidized if the borrower applied for the loan before July 1, 1993. All other Stafford Loans are unsubsidized.

How Does an Unsubsidized Stafford Loan Work?

An unsubsidized Stafford Loan is a student loan that is not backed by the federal government. The interest on this type of loan starts accruing as soon as the loan is dispersed. Because the government is not paying the interest on this loan, it is generally a more expensive option than a subsidized Stafford Loan.

What Are the Benefits of an Unsubsidized Stafford Loan?

There are a few benefits to taking out an unsubsidized Stafford Loan:

-You don’t have to pay any interest on the loan while you’re in school.
-The interest rate on unsubsidized Stafford Loans is fixed, so you know how much your payments will be when you start repayment.
-You can choose to have your payments deferred while you’re in school, which can help ease the financial burden while you’re studying.
-Unsubsidized Stafford Loans are available to both undergraduate and graduate students, so they can be a good option if you’re continuing your education.

What Are the Disadvantages of an Unsubsidized Stafford Loan?

There are a few potential disadvantages of an unsubsidized Stafford loan to consider before taking on this type of debt.

First, unsubsidized Stafford loans accrue interest from the time the loan is first disbursed. This means that the balance of the loan may grow significantly over time, leading to a larger amount of debt to repay.

Second, unsubsidized Stafford loans are not need-based, which means that they are available to all borrowers regardless of financial need. This can make it difficult for some borrowers to obtain this type of loan.

Third, unsubsidized Stafford loans have a higher interest rate than subsidized Stafford loans. This means that the total cost of the loan will be higher over time.

Before taking out an unsubsidized Stafford loan, be sure to consider all of the potential disadvantages and weigh them against the advantages of this type of loan.

How to Apply for an Unsubsidized Stafford Loan

Whether you’re a undergraduate or graduate student, you may be eligible to receive an unsubsidized Stafford Loan from the federal government to help finance your education. If you’re not sure whether you’re eligible or how to apply, read on for more information.

To be eligible for an unsubsidized Stafford Loan, you must:
-Be a U.S. citizen or eligible non-citizen
-Have a valid Social Security number
-Be enrolled at least half-time in an eligible degree or certificate program at an approved school
-Not be in default on any federal student loans or owe money on a federal grant
-Meet additional requirements that may vary by school

If you meet the above requirements, you can begin the process of applying for an unsubsidized Stafford Loan by completing the Free Application for Federal Student Aid (FAFSA). The FAFSA is used to determine your financial need, and your school will use it to award any federal aid for which you may be eligible, including grants, work-study, and loans. You can complete the FAFSA online at fafsa.ed.gov.

After you’ve completed the FAFSA and been notified of your aid award by your school, you’ll need to complete a Master Promissory Note (MPN) and Entrance Counseling session before your loan can be processed. The MPN is a legal document in which you promise to repay your loan(s) and any accrued interest and fees to the U.S. Department of Education. You can complete the MPN online at studentaid.gov/mpn. Entrance Counseling is an online session that provides important information about your rights and responsibilities as a student loan borrower; it also gives you an opportunity to ask any questions about repaying your loan(s). You can complete Entrance Counseling at studentaid.gov/entrance-counseling.

Once you’ve completed the MPN and Entrance Counseling session (if required), your school will certify your loan and disburse the funds to cover your tuition and other expenses (less any other financial aid you’ve been awarded). Depending on your school’s policy, disbursement may occur at one time or in multiple installments throughout the year.