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What to Know Before Taking Out a Subsidized Loan

Attending a reputable university or college can be a dream for everyone. However, this higher education may be too expensive for some people and families. Tuition at American colleges and schools has constantly increased for several decades. You also need to consider some other costs other than tuition costs, for example, off-campus living expenses, meal plans, living costs, textbooks, supplies, and any other fees. The total amount of money that you are going to invest in pursuing your dream can be big enough for your pocket. Fortunately, there are several types of financial aid that you can find for helping you prepare all costs for attending school.

Government programs, scholarships, and grants are specially created to help you pursue higher education, although you have a limited budget for your school. You can also take some student loans, including federal and private loans for funding your college fees. You need to plan your finance before you decide to take any student loans for your education. One of the most popular loans that you can take is the subsidized loan. In this article, we are going to talk about this type of loan. There are some important details that you need to know about this loan.

What is a subsidized loan?

A subsidized loan is a federal loan that is offered via the US department of education. It is commonly known as the direct subsidized loan. It is exclusively created for undergraduate students who have a financial need for funding any fees for entering their favorite college, university, and career school.

This type of loan has some similarities as the other student loans. You can take this loan for paying your college fees and pay the principal and the interest back later in the future. This loan doesn't require you to repay the loan while you are attending the college or school. There is a grace period of six months after you are graduated, so you can have enough time for finding a job for paying back this loan.

One of the most important features of this loan is that the government is going to pay the interest, especially when you are attending the school. The government will also pay the loan interest during the grace period. You only have a responsibility to pay the interest when you start repaying your loan. It can be a good feature that can help you save a lot of your money when taking this student loan. This loan offers lower lifetime expenses than other student loans.

Who is eligible for getting this subsidized loan?

A subsidized loan is not available for everyone. There are some basic requirements that you need to meet before you can take this loan from the Federal Direct Loan Program. All applicants of this loan must show their financial needs and be enrolled in any undergraduate program at least half time. When you are planning to take this loan, you have to fill out and also submit a form called Free Application for the Federal Student Aid or FAFSA form. The government will check everything before your loan application can be approved.

What else do you need to know?

When taking this subsidized loan, you need to check both the time limit and loan limit for your case. Your school or college will determine how much you are allowed to borrow. Here are some requirements that you need to know about this loan.

  • In the 1st undergraduate year, you will be allowed to borrow federal loans for up to $5,500. Only $3,500 can be in the subsidized loan form.
  • In the 2nd undergraduate year, you will be allowed to borrow federal loans for up to $6,500. Only $4,500 can be in the subsidized loan form.
  • In the 3rd undergraduate year, you will be allowed to borrow federal loans for up to $7,500. Only $5,500 can be in the subsidized loan form. This limit will also apply to the 4th year and so on.

You are limited to receive this subsidized loan for up to 150% of the published time of the degree program. For example, when you attend a four-year bachelor's program, you are allowed to receive a subsidized loan for about 6 years. You need to prepare everything, so you can have a good chance of getting your loan approved.