The average student loan debt in America is about $1.75 trillion, according to Forbes statistics. From the total debt, only 22% of adults have reported having repaid their student loans. The Federal Student Aid interest rate for direct subsidized loans and direct unsubsidized loans is set at 4.99% for undergraduate students. For graduate and professional students under direct unsubsidized loans, the interest rate is set at 6.54%. It is inadvisable to end your teenage years with the pressure of debt repayment instead of focusing on the trajectory of your career. Students tend to focus more on ways to repay the debt amount by settling for a job that pays a good hourly salary. On agreeing to the federal student loan terms, you must repay the debt even if you choose to discontinue the program, if you don’t find a job after completing the course, or even if you wish to change your major or institution.

Key Differences Between Subsidized and Unsubsidized Loans

Subsidized Loans	Unsubsidized Loans
Only available to undergraduates with a financial need.	Available to graduates and students with or without financial need.
2. Federal government takes charge of the interest until college completion.	2. Interest accrues from the time of the loan disbursement.
3. Fewer interest rates with deferment option.	3. High-interest rates and deferment options with accruing interest.
4.  Grace period of 6 months is allotted.	4. No grace period is allotted.
5. The loan limit is less compared to unsubsidized loans.	5. You have a higher loan limit.

  As listed above, unsubsidized student loans come with their set of cons with little advantage for students with financial needs. Neither subsidized nor unsubsidized loans create a hard inquiry on your credit history. Between the two student loans, consider whether the loan limit is sufficient to pay your fees and whether the interest rate is manageable. However, federal student loans also rely on your academic performance to determine your financial aid package. 

The Procedure To Apply for an Unsubsidized Loan

What is an Unsubsidized Loan – How to Apply for Students Loan
As a student, you must check your loan eligibility with the Free Application for Federal Student Aid (FAFSA). The eligibility criteria for students are:

• A citizen of America.
• No record of previous loans or financial aid.
• Enrolled as, at least, a part-time student.
• Positive academic results (may vary based on institutions)

Fill out the application form using this link, and follow the necessary steps. If you are unsure about the entire process and funding, you can appoint a counseling session with the Student Aid team, and get educated on the loan approval process. You are proposed two financing options to choose from, i.e, a subsidized or unsubsidized loan with corresponding loan limits, interest rates, deferment terms, and grace period if need be. On completing the entire process, go to the Federal Student Aid official website to log in, click Roles, and view my student aid record (SAR).  Eligible applicants include students applying for their own loans, parents applying on behalf of their children, or preparers helping a student fill out the FAFSA form.  Suggested Articles:

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Frequently Asked Questions

1. Should I choose a subsidized or unsubsidized loan?

To be precise, the direct subsidized loan option has better terms when compared to other financial aid options. However, since it is limited only to undergraduate students and is purely dependent on the student’s financial needs, students consider an alternate loan option. 

2. Can unsubsidized loans be forgiven?

Yes, almost every type of federal student loan held under the Department of Education is eligible for forgiveness. It includes direct subsidized loans, direct unsubsidized loans, direct or parent PLUS, and graduate PLUS loans. In contrast, the federal family education loans, private student loans and any student aid that is not Ed-held cannot be forgiven.

3. How do I qualify for an unsubsidized student loan?

You need to have a FAFSA ID to check your eligibility and apply for student aid. Note that you do not necessarily need to be an undergraduate to qualify for the loan or demonstrate financial need. 

4. What is the interest rate for direct unsubsidized loans?

For direct unsubsidized loans, the interest rate is set at 4.99% for undergraduate students, and 6.54% for graduate and professional students. These values are set by the Federal Student Aid. 

Closing Thoughts

If you are planning ahead to stay in the financial business, your student loan payments have a great impact on your credit report, as on-time payments boost your credit score, and help you maintain a healthy financial status. An unsubsidized loan is the best option considering the broader eligibility criteria, and higher loan amount in spite of the accrued interest. In this article, we saw the requirements to get an unsubsidized student loan, the differences between both federal loan options, and a quick heads-up about student financing options. If you have a poor credit score or are trying to figure out a way to repair your credit score, TheCreditPros has been a credit repair services company for more than a decade, producing positive results for customers. Get a free consultation, and repair your credit score with the help of an AI-driven personal credit management system.