What is a Federal Unsubsidized Loan?

A Federal Unsubsidized Loan is a type of student loan that is not backed by the government. This means that the interest on the loan will accrue during your time in school.

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What is a Federal Unsubsidized Loan?

A Federal Unsubsidized Loan is a type of financial aid that you can use to help pay for your education. Unlike a subsidized loan , you will be responsible for all the interest that accrues on your unsubsidized loan. However, you can choose to pay the interest while you are in school or let it accrue and be added to your principal balance.

What are the eligibility requirements for a Federal Unsubsidized Loan?

To be eligible for a federal unsubsidized loan, you must:

-Be a U.S. citizen or eligible non-citizen
-Have a valid Social Security number
-Have registered with the Selective Service (if you are a male between the ages of 18 and 25)
-Be enrolled or accepted for enrollment as a regular student in an eligible degree or certificate program at an accredited college or university
-Not be in default on any federal student loans or owe an overpayment on a federal student grant
-Have financial need (for most programs)
-Be enrolled at least half-time to receive Direct Subsidized Loans or Direct Unsubsidized Loans

How much can I borrow with a Federal Unsubsidized Loan?

Federal Unsubsidized Loans are not based on financial need, so there is no limit to the amount you can borrow. However, there are limits on the total amount of federal student loans that you can take out. These limits are generally based on your year in school and whether you are a dependent or an independent student.

What is the interest rate for a Federal Unsubsidized Loan?

The interest rate for a Federal Unsubsidized Loan is the same as the interest rate for a Federal Direct Subsidized Loan. The current interest rate for both types of loans is 4.53%.

What are the repayment terms for a Federal Unsubsidized Loan?

Federal Unsubsidized Loans are not eligible for the Direct Loan program’s interest subsidy benefits, meaning that the accruing interest is not paid by the federal government while the student is enrolled in school at least half-time, during their grace period, or during a deferment period. Borrowers are responsible for all of the accrued interest on Federal Unsubsidized Loans. Unpaid interest will be capitalized (added to the principal balance of your loan) when you enter repayment. This will increase the size of your monthly payment and the total amount you will repay over the life of your loan.

How do I apply for a Federal Unsubsidized Loan?

To start, you will need to fill out a FAFSA form which can be found on the official website. After you have submitted the form, you will then need to contact the financial aid office of the school you are attending to find out more about the process. The financial aid office will then provide you with more information on how to apply for the loan.

How do I complete the Free Application for Federal Student Aid (FAFSA)?

To apply for a Federal Unsubsidized Loan, you must complete the Free Application for Federal Student Aid (FAFSA). Once you have completed the FAFSA, you will be notified of your eligibility for federal student aid. If you are eligible for a Federal Unsubsidized Loan, you will be notified of the loan amount for which you are eligible.

How do I complete the Master Promissory Note (MPN)?

To complete the Master Promissory Note (MPN) you will need the following:
-Your FSA ID to sign electronically or your Social Security Number (SSN) if you plan to print and submit a paper MPN
-Information about the school you are attending or plan to attend
-Banking information, if you choose the option to have your funds disbursed directly to your bank account
-Driver’s license or other valid photo ID

Once you have gathered this information, visit StudentLoans.gov and complete the following steps:
1. Select Complete Master Promissory Note from the logged in homepage.
2. Select Subsidized/Unsubsidized from types of loans section.
3. Enter requested information about yourself, your educational plans, and your loan conditions. Be sure to carefully review this information for accuracy before moving on.
4. Review and electronically sign the MPN or print and sign a paper copy. If you choose the paper option, mail your signed MPN to the address provided on the document.

How do I receive my Federal Unsubsidized Loan funds?

Your loan will be disbursed to your school in at least two installments. The first installment will be sent to your school after the initial loan process is completed. The second installment will be sent to your school at the beginning of the second semester, or if you’re a student who attends school year-round, after the first half of your academic year is completed.

What are my responsibilities as a Federal Unsubsidized Loan borrower?

You are responsible for paying the interest that accrues on your unsubsidized loan(s) while you are in school as well as during your grace, deferment, and forbearance periods, and repayment. You can either choose to pay the interest while you are in school or allow the interest to accrue and be capitalized (added to your principal balance), which will increase the amount you have to repay.

What are the consequences of defaulting on my loan?

Defaulting on your student loan has serious consequences that can last for years.

If you default, the entire unpaid balance of your loan and any interest you owe becomes immediately due and your loan will be placed in default. In addition, if you have a federal student loan, the Department of Education will take action to recover its money. This includes using one or more collection agencies to bring your loan out of default. The agency will report your default to credit bureaus, which could damage your credit rating and make it hard to buy a car or house or get credit cards.

Your federal student loans may also be assigned to a debt collector. You may end up paying significant collection fees in addition to the amount you already owe on your loan. The government can also offset (take) any federal payments you are entitled to receive, such as your tax refund, in order to collect on defaulted loans. If your state provides a debt set-off program, the government might also withhold money from your state tax refund.

The loan holder can take legal action against you, which could lead to wage garnishment or having money deducted from your paycheck until the debt is repaid. If sued, you’ll have to appear in court and if you lose, the court will enter a judgment against you that includes additional fees and interest charges. The court could also order wage garnishment or seizure of property as part of the judgment.

Defaulting on your student loan also means that you lose eligibility for deferment, forbearance, and repayment plans and you’ll no longer be able eligible for additional federal student aid if you decide to return to school.

What are my repayment options?

The first thing you need to do is contact your loan servicer. They will help you understand all of your repayment options, which may include:
-Standard Repayment Plan: You’ll pay a fixed amount each month for up to 10 years.
-Graduated Repayment Plan: Your payments will start off low and increase every two years. You’ll have up to 10 years to repay your loan.
-Extended Repayment Plan: If you have more than $30,000 in Federal Direct Loans, you can choose this plan. Your payments could be lower than they would be on the standard plan, but you’ll have up to 25 years to repay your loan.
-Income-Driven Repayment Plan: With this option, your monthly payment is based on your income and family size. You’ll have 20 or 25 years to repay your loan, depending on the plan you choose.
-Pay As You Earn (PAYE) Plan: Monthly payments are 10% of your discretionary income. Any remaining balance is forgiven after 20 years of qualifying monthly payments.
-Revised Pay As You Earn (REPAYE) Plan: Monthly payments are 10% of your discretionary income. Any remaining balance is forgiven after 20 or 25 years of qualifying monthly payments, depending on whether any of the loans being repaid under this plan are for graduate or undergraduate study.
-Income-Based Repayment (IBR) Plan: Monthly payments are 15% of your discretionary income if you borrowed your first loan on or after July 1, 2014, or 10% if you borrowed your first loan before July 1, 2014 . Any remaining balance is forgiven after 20 or 25 years of qualifying monthly payments, depending on whether any of the loans being repaid under this plan are for graduate or undergraduate study.
-Income-Contingent Repayment (ICR) Plan: Monthly payments are the lesser of 20% of your discretionary income or what you would pay on a repayment plan with a fixed payment over the course of 12 years adjusted according to your income. Any remaining balance is forgiven after 25 years of qualifying monthly payments

What are the deferment and forbearance options for my loan?

With an unsubsidized loan, you’re responsible for paying the interest that accrues on the loan while you’re in school, during your grace period, and during any periods of deferment or forbearance.

If you choose not to pay the interest while you’re in school and during your grace period, your interest will accrue and be added to your principal balance (capitalization) when repayment begins. This will cause you to pay more interest over the life of the loan.

You have the option of paying the interest as it accrues, or you can allow it to accrue and be capitalized.

What are my discharge and forgiveness options?

If you are unable to make your Federal Unsubsidized Loan payments, you may be eligible for a deferment or forbearance. During deferment, you are not required to make payments on your loan. If you qualify for forbearance, you may be able to temporarily stop or decrease your payments. To learn more about these options, contact your loan servicer.

In some cases, you may be able to have your Federal Unsubsidized Loan discharged. You must meet certain conditions to qualify for a discharge. For example, your loan could be discharged if you become totally and permanently disabled or if you die.

To learn more about these options, contact your loan servicer or the Department of Education at 1-800-4-FED-AID (1-800-433-3243). TTY users can call 1-800-730-8913.