25 märts What’s the Difference Between Subsidized and Unsubsidized Loans?
The difference between subsidized and unsubsidized student loans payday loans in Maine depends mainly on who pays the interest on the loans during the in-school and grace periods.
The federal government pays the interest on subsidized loans while the student is enrolled in college at least half-time, during the grace period before repayment begins, and during periods of authorized deferment. If the student drops below half-time enrollment or graduates, repayment will begin at the end of the grace period. Authorized deferments include the economic hardship deferment, which is available for up to 3 years in total duration.
The borrower remains responsible for paying the interest on unsubsidized loans. If the borrower defers paying the interest as it accrues during the in-school, grace and deferment periods, the interest is capitalized (added to the loan balance). The borrower is responsible for the interest on both subsidized and unsubsidized loans during a forbearance.
In the federal Direct Loan program, interest is capitalized on unsubsidized loans when the repayment status of the loan changes.
With private student loans, interest may be capitalized more frequently. With some private student loans, interest may be capitalized as frequently as monthly.
For example, interest that accrues during the in-school and grace periods will be capitalized when the loan enters repayment at the end of the grace period

There are certain periods of time when interest is not capitalized on unsubsidized Federal education loans. This includes interest that accumulates during an administrative forbearance or during negative amortization on an income-driven repayment plan.
Interest capitalization can significantly increase the size of an unsubsidized loan. Typically, interest capitalization will increase the loan balance on a borrower's unsubsidized loans by as much as a fifth (20 percent) to a quarter (25 percent) by the end of the in-school and grace periods.