<p>We were offered an unsubsidized Stafford Loan. Frankly,it seems as if they are giving us "snow in the winter." What exactly is that?</p>
<p>That's the one where interest starts accruing the minute you take out the loan. With the subsidized one, you don't accrue interest charges until after graduation.</p>
<p>I'm not a pro and can't believe I'm trying to give advice to 'taxguy', but it means the interest that accumulates (quarterly, I think) gets added to the loan amount (or your could pay it) so your debt builds. With a subsidized loan, the interest is paid by the government until the student graduates. </p>
<p>I think every full time student is eligible for a Stafford loan. In order to be offered the subsidized version, you have to qualify. When my s. applied to colleges, he was offered a subsidized loan at his college. We asked them to reconsider the aid package and they gave him a small grant and an unsubsidized Stafford loan. We have paid the interest (a statement comes periodically) even though it's not 'due', they're just informing him. We are in effect subsidizing his Stafford loan.</p>
<p>I'm not sure if it's snow in the winter - when s. started school, the interest rate on Stafford loans was very low. Although rates have risen (there's a whole thing about 'consolidating loans' that I confess I've never bothered to look into and don't know who is eligible) I think Stafford's are still better than Plus loans. No debt is best of all.</p>
<p>Lefthand has pretty much got it right.</p>
<p>Yup, I thought that was what a unsubsidized loan was. Thus, it is "snow in the winter."</p>
<p>SallieMae does a good job explaining all these things, TaxGuy. I had a similar Q a week ago.</p>
<p>TG, this site offers a good explanation:</p>
<p>Federal Stafford Loans </p>
<p>Federal Stafford Loans are the most common source of education loan funds and are available to both graduate and undergraduate students. There are two types: Federal Subsidized and Federal Unsubsidized. </p>
<p>Subsidized Loans
Subsidized loans are need-based. The federal government pays the interest on these loans while the student is in school and during the grace period before repayment begins. </p>
<p>Interest subsidy:
The federal government pays interest on the loan while you are in school or during any grace period. </p>
<p>Repayment begins:
Following a six-month grace period after leaving school. </p>
<p>Loan limits:
Annual limits:
Year 1 $2,625
Year 2 $3,500
Years 3 and 4 $5,500 per year
Graduate student $8,500 per year </p>
<p>Interest rate:
* Annual limits are variable and may change on July 1. For loans disbursed on or after July 1, 1998, rates are set:
* During in-school, grace, or deferment, rate based on 91 day T-bill rate + 1.70%.
* During repayment periods, based on 91 day T-bill + 2.30%.
* Capped at 8.25%.
* Based upon current rates. </p>
<p>Total origination or insurance fees: 4% (3% to the federal government and 1% to the state or regional guaranty agency to cover administrative costs). </p>
<p>Repayment term:
Up to 10 years. </p>
<p>Unsubsidized Loans
Unsubsidized loans are not need-based. You, the borrower, are responsible for the interest on the loan as soon as it is taken out. Most of the terms and conditions of subsidized and unsubsidized Stafford loans are the same. </p>
<p>Annual limits:
Year 1 $2,625 (dependent)
$6,625 (independent)
Year 2 $3,500 (dependent)
$7,500 (independent)
Years 3 and 4 $5,500 per year (dependent)
$10,500 per year (independent)
Graduate student $18,500 per year (less amount of
subsidized Stafford loan awarded) </p>
<p>Cumulative loan limits differ for undergraduate and graduate/professional students. </p>
<p>For undergraduate students: </p>
<p>Dependent$23,000 between subsidized and unsubsidized Stafford loans
Independent$46,000 (up to $23,000 may be in subsidized Stafford loans)
For graduate and professional students: </p>
<p>$138,500 (up to $65,500 may be in subsidized Stafford loans) </p>
<p>Interest rate:
Annual limits are variable and may change on July 1. For loans disbursed on or after July 1, 1998, rates are set:
* During in-school, grace or deferment, rate based on 91 day T-bill rate + 1.70%.
* During repayment periods, based on 91 day T-bill + 2.30%.
* Capped at 8.25%.
* Based upon current rates. </p>
<p>Interest capitalization:
Unpaid interest will be capitalized at the start of repayment and at the end of any deferment. If borrowers obtain forbearances, interest may be capitalized no more frequently than quarterly, and again at the end of forbearance. </p>
<p>Total origination or insurance fees:
4% (3% to the federal government and 1% to the state or regional guaranty agency, to cover administrative costs). </p>
<p>Repayment term:
Up to 10 years. </p>
<p>Minimum payment:
$600 per year ($50 per month per FFELP loan account). Borrowers who take out Stafford loans from more than one lender may be required to make more than one minimum payment. </p>
<p>Interest subsidy:
Not applicable. </p>
<p>Repayment begins:
Following a six-month grace period after leaving school.</p>
<p>Here's my question: How do you figure out if a student qualifies for a subsidized loan? I get that they are need-based, but I haven't seen an income chart that explain at what (approximate) income you no longer qualify for the subsidized ones.</p>
<p>how about parent plus loans, I have to pay now even though my son still have 3 years to go. not likeing that too much.</p>
<p>We just got one of those handy little notices in the mail. Apparently, we can either pay the interest when the statement comes, or else it will accrue and all be due in one lump sum at the end. Is that correct?</p>
<p>I don't think you have to pay the interest in one lump sum at the end - it's added into the loan amount quarterly and therefore means you'll have a bigger monthly payment when you do start paying the loan back.</p>
<p>Sorry, but I do not believe the Stafford unsubsidized loans are "snow in the winter". We are paying for most our kids' college educations but we are asking that they take the Stafford loans. We do not qualify for unsubsidized ones as those are awarded to students with financial need. And FYI...Unsubsidized Stafford loans are only available to you if you file a FAFSA.</p>
<p>Yes, I believe that the unsubsidized Stafford is offered to anyone who files the fafsa.</p>
<p>Then there is another loan, the Perkins. We just received a horrible package from a school today. Unlike some other offers, this one was loaded with loan offers. It even included a Perkins Loan (along with Staffords). I did not know we even qualified for this one. This is the only school out of 5 packages to offer it to us. It was also the worst financial package out of the 5 offers. My son would be sweating it for years, to pay all of these loans back. I hate to see the package of juniors and seniors at this school!</p>
<p>Lefthand--Look into consolidation! Soon!
Interest on unsubsidized staffords is going from 4.7% to 6.8% on July 1.
The caveat is that you forfeit the grace period upon graduation. But if you are the subsidizer, you will be saving significant interest and can presumably help the kid out in the first 6 months (the forfeited grace period).</p>
<p>Thanks, mominva - He has another 1 1/2 years to go, though, and I wasn't sure you could consolidate until you were done with undergrad. I'll check it out.</p>
<p>on the interest rates for student loans and possibly a bit better in the future with the interest capped at 6.8%, and fixed. The last 4 years of low interest rates was highly unusual and prompted many of us to refi or purchase a home at unreasonably low interest rates. </p>
<p>If you are thinking of stafford both unsubsidized or subsidized, and PLUS loans, you may want to investigate Home Equity loans or combination. If you do consider an HE program besure that you include closing fee and recurring costs to your "rate" to arrive at your true APR. GL</p>
<p>I have checked it out for both of my college kids, 2 different lenders. It was explained to me as actually a 2 step process. File for repayment status to include all existing loans (from all lenders, if more than one); and also apply for in-school deferment.
Next year's loans, if you take them, will be at the higher rate.</p>
<p>I have a question related to this. My S has received 3 packages. All the schools have approx. the same tuition and R&B (after scholarships). One school offered a subsidized loan, one a unsubsidized loan and one is half sub and half unsub. </p>
<p>Does anyone have any idea why the packages are different? They all offered the same amount, the only difference is subsidized and unsubsidized. Can I ask the school that gave us the unsubsidized loan to change it to subsidized?</p>