What Are Unsubsidized Student Loans?
Students have many options when it comes to financing their post-secondary education. Those who qualify should take advantage of grants first and then subsidized student loans since the interest on subsidized loans does not begin to accrue until after leaving school. However, when grants and subsidized student loans are not available or not enough, students can apply for unsubsidized student loans.
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Benefits
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The federal government provides unsubsidized Stafford loans to both undergraduate and graduate students regardless of financial need. Subsidized loans, on the other hand, are awarded based on financial need only. Thus, unsubsidized loans are a good option for those students whose household income is too high to qualify for grants and subsidized loans but not enough to finance the education.
Time Frame
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Unsubsidized student loans are awarded annually after you complete your Free Application for Federal Student Aid form online (see Resources). The federal government disperses funds to your college or university at the beginning of each school term. Any money left over after paying your tuition and other fees will be refunded to you. The interest on unsubsidized loans begins to accrue as soon as the loan is dispersed and continues to accumulate over the life of the loan.
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Limits
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First-year undergraduate students can borrow up to $5,500 if they are dependent students or $9,500 if they are independent students. Second-year dependent undergraduate students can borrow up to $6,500 and independent undergraduate students can borrow up to $10,500. Third and fourth year dependent undergraduate students can borrow up to $7,500 and independent undergraduate students can borrow up to $12,500. You can borrow up to $31,000 total as a dependent undergraduate student, $57,500 total as an independent undergraduate student. You may borrow a combined total in undergraduate and graduate school of $138,500. Your college or university may specify lower limits than the maximum allowed by the federal government.
Repayment
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Once you stop attending school at least half-time, payments on your unsubsidized students loans will be due to begin within six months. If you return to school and then leave school again, payments will be due the first month after you stop going to school at least half-time. Loans may be repaid over 10 to 25 years. In some cases repayment terms can be stretched out to 40 years for those with financial hardships.
Considerations
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While unsubsidized Stafford loans offer generous loan limits, students should carefully consider the consequences of accumulating thousands of dollars in loans. Many students are shocked when they receive their first payment statement after finishing school.
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