What Is Subsidized Loan ?

A subsidized loan is a student loan for undergraduate students who demonstrate financial need. This type of loan doesn't accrue interest the same way other loans do because the government temporarily covers interest costs. Subsidized loans are only available to undergraduate students, while unsubsidized loans are open to undergraduates, graduates and those seeking professional degrees. Subsidized loans require students to demonstrate financial need, while unsubsidized loans do not. Because subsidized loans are intended for students who need greater financial assistance, they come with additional financial perks. With subsidized loans, the federal government pays (or "subsidizes") interest that accrues while the student is enrolled in school at least half time, during the six-month grace period after the student leaves school and during loan deferment. When a lender applies a subsidy to the interest portion of a loan on behalf of the borrower, it's defined as a subsidized loan. The lender generally pays the interest charges on the loan during certain periods. 

Benefits Of Subsidized Loan

Subsidized loans come with some great benefits:

• Because the federal government pays the interest during the periods noted above, subsidized loans will save you money.
• They offer flexible repayment options you won't find with private loans.
• You'll pay lower interest rates on these loans than on comparable private student loans.