Most people don't know the difference between subsidized & unsubsidized loans. As a result more people fall into the problem of excessive interest piling up. Knowing the difference between these types of loans will help you.
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Feb. 1, 2011 - PRLog -- Taking out student loans seems to be the norm for young people attending college these days. While I feel going with scholarships & grants is a better way to go most people stick with the loans because they are the easiest to navigate.
The problem is there are two main kinds of students loans. One is called subsidized student loans. The other is called unsubsidized student loans. There is one huge difference between these two types of loans. It revolves around interest.
With subsidized loans interest will accumulate from the moment your loan approves. Each month you should receive a letter via snail mail or email indicating how much interest has accumulated for that month. It also gives you the option to pay the interest. You won't be forced to pay the interest each month but the interest will be added to your loan total if you don't pay each month, which could result in having to pay nearly twice as much.
This is what makes unsubsidized loans so attractive. Yet people fail to take advantage of them. Unsubsidized loans do not accumulate interest so long as you are in school. Meaning the loan amount you will have to pay remains the same over the course of your college career.
A great idea is paying twice the interest on subsidized student loans each month, this will make it easier to pay off the loan upon graduation. Paying a few dollars each month towards an unsubsidized student loan is also helpful.