A subsidized Stafford loan is a federal loan for continuing education that is available to qualifying students. This type of loan is granted by the United States Department of Education through the channel of the Federal Direct Student Loan Program. This is a loan that the government expects to be paid back; in contrast to a non-repayable federal grant. What are the advantages of getting a subsidized Stafford loan rather than simply working with an ordinary lending institution? This is because the federal government can afford to give more and to offer much better contracts on accumulating interest than commercial lenders can.

What is the difference between a subsidized Stafford loan and unsubsidized Stafford loan? Subsidized loans are given to students based on their demonstrated financial need. In other words, the federal government covers the interest of financing during your enrollment. This way, you will not be charged interest before you begin to repay your loan or even during periods of deferment. However, subsidized Stafford loans still can accrue interest; interest begins after graduation (or withdrawal) and following the stated grace period.

An unsubsidized Stafford loan requires that a student pay back all of the accrued interest that results from financing the loan-all the way to the period of enrollment. Subsidized Stafford loans have more stringent requirements, specifically in that students must demonstrate financial need before qualifying. An unsubsidized Stafford loan can be given more freely, as long as the student meets other necessary requirements.

Additionally, subsidized loans have limits on how much money can be handed out per year. Unsubsidized loans have limits also, but usually offer a much higher cap on the loan amount, sometimes as much as $5,000. Students may have to apply for subsidized loans and unsubsidized loans, as well as alternative methods of financing, because the loan amount is usually not the entire cost of a college education.

Subsidized loans are awarded on the grounds of financial hardship. In order to qualify for subsidized loans, you must fill out a Free Application for Federal Financial Aid and send it to the appropriate department at your school. Remember that you can only apply for a loan for the current academic year and must regularly re-apply every year that follows. The school will evaluate your loan request and later inform you if your application is successful.

Subsidized loans are an option to seriously consider as they could give you a break on all that fixed interest.