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What Are Subsidized Loans? – A Brief Summary «

What Are Subsidized Loans? – A Brief Summary

Subsidized college and university loans are guaranteed sources of financial aid that can save you and/or your parents hundreds of dollars in accrued interest payments. The loans are generally awarded to students who demonstrate financial need.
The United States started subsidizing student loans in 1965. Since that time the government has subsidized thousands of student loans. In fact, College Board reports that as of 2011, nearly half of college and university students attending school full-time receive some type of student loan. Total amount of the loans for all of these students is about $57 billion, making the student loan business quite profitable. If you no longer live with your parents, work a part-time or full-time job that doesn’t pay a lot, you might qualify to receive a subsidized student loan. Additionally, should you live with your parents and your family meets federal financial guidelines, you might also be able to get a subsidized student loan. Common subsidized student loans are the Federal Stafford Loan and the Perkins loan.

Benefits of Subsidized Student Loans
Unlike other student loans, subsidized student loans do not require that you or your parents to have credit history in order to receive the loans. Interest rates applied to the loans are also generally low, remaining no higher than the five percent mark. Good news is that interest accrued on guaranteed subsidized student loans funded by the federal government are paid by the government, not you, the student. Another benefit of subsidized student loans is that you do not have to start repaying the loans until after you graduate with your college or university degree. Some subsidized loans are managed through private financial institutions.

The Federal Perkins and Federal Stafford loans pay out approximately $400 to $5,500 a semester to qualifying students. To receive the loans you must complete a Free Application for Federal Student Aid (FAFSA). The applications can be completed and submitted online or you can print the applications and mail them in via the post office. Information required on FAFSA applications includes:

•Your name and date of birth
•Your parents’ names and dates of birth
•Your employer’s name and your annual wages
•Your parents’ employers’ names and your parents’ annual wages
•Name of the accredited college or university you are attending
•School code for the college or university you’re attending
A lot of the financial information required on the application is available on you and your parents’ previous year’s income tax returns. In fact, you might later be asked to submit a copy of both income tax returns to your college or university’s financial aid or business office. Furthermore, to receive a subsidized student loan you must be a United States citizen or permanent resident. You must also attend school on at least a half-time basis.

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