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Unsubsidized Loan - Definition and Overview of Unsubsidized Loan


College students at campus
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Unlike a subsidized loan, an unsubsidized student loan has interest added to the balance even while a student is still enrolled in school. This means that a student's balance will likely be significantly more than what they initially borrowed by the time the graduate.

For example, a student borrowing $10,000 per year at 8%, would owe $48,666 dollars after four years of college (approximately $8,666 more than they initially borrowed).

A popular technique of students and parents looking to eliminate the "sticker shock" of an unsubsidized loan is to attempt to pay off the interest as it is added throughout the college years.

Unsubsidized loans are generally the only choice for students who fail to demonstrate a financial need, though they still generally offer attractive interest rates (less than 10%) over private loans.

The most common subsidized loans are Stafford and PLUS loan loans.

Common Misspellings: unsubsidised loans

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