Subsidized loans are loans for which the borrower does not pay interest. Interest would normally be charged periodically according to the annual percentage rate (APR). However, with a subsidized loan the interest is paid by another party.
Who Subsidizes Loans?
Anybody can subsidize a loan. Depending on the type of loan, it might be a government organization, a charity, or other group. For subsidized Stafford Loans (a form of student loan), the US government pays interest while students are in school.
How do I Qualify for Subsidized Loans?
Depending on the source of your loan, you’ll need to see if you qualify. Some housing loans (like some first time home buyer loans) require that you live in a certain area and earn less than a specified dollar amount. Student loans may be subsidized if you can demonstrate financial need – based on your income and resources compared to the cost of attending a school.
Student Loan Details
In addition to demonstrating financial need, you’ll need to meet some other criteria to have a subsidized student loan. The loans are only subsidized while you’re:
- Enrolled at least half time
- During certain deferment periods
- During a grace period
Note that you may borrow using unsubsidized and subsidized loans in the same year.