An Introduction to Subsidized Student Loans

The Federal government awards two types of loans to college students: subsidized student loans and unsubsidized student loans. Unsubsidized loans, as the name suggests, do not involve any sort of special help or compensation for the borrower. In the case of unsubsidized loans, the borrower must be repaying not only the loan, but also the interest that has accrued, upon graduation.

This is not so with subsidized student loans. Upon graduation, a student must only repay the initial amount borrowed, not the interest accrued. The Federal government will actually pay the interest accrued while the student is enrolled.

If you're planning to enroll in the upcoming semester, you probably think that subsidized student loans sound great and you might wonder how you can get one. Unfortunately, the only way you can receive subsidized student loans is if the government deems you eligible. The government will largely base this on your expected family contribution (EFC)--or the total amount that they estimate that your family should be able to contribute.

If you've ever filled out a FAFSA and have generated one of these EFC numbers, you more than likely thought that the amount was simply unrealistic, as is the case in many instances. In many cases, this number will be as much as or more than 10% of you and your parents' income combined, regardless of whether or not your parents can or are willing to contribute to your loans.

If you have an unusually high EFC, do not despair. While it is hard to get subsidized student loans under such circumstances, it is not possible. You can always contact your bursar and ask for help with filing “special circumstances” papers. This will not only allow you to increase the total amount of Federal unsubsidized loans you receive, but it also may help you get more subsidized loans and possibly some grants.