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what is the interest rate on subsidized student loans

Last Updated on August 12, 2023 by Oluwajuwon Alvina

Student loans are always a hot topic, and the interest rate on subsidized student loans is no exception. In this post, we review the aspects of what is the interest rate on subsidized student loans, subsidized vs unsubsidized loans, unsubsidized loan interest rate, stafford loan interest rate and parent plus loan interest rate.

Subsidized student loans have a lower interest rate than unsubsidized student loans. In addition to that, subsidized student loans are safer to take because they don’t accrue any interest while you are in school. However, if you are not in school or your grace period is over, then your loan will start accruing interest which can be high as 6% from the date of disbursement. This can be reduced if you pay back your loan timely and on time every month. Read on to know more about what is the interest rate on subsidized student loans, subsidized vs unsubsidized loans, unsubsidized loan interest rate, stafford loan interest rate and parent plus loan interest rate.

In addition to that, subsidized student loans are safer to take because they don’t accrue any interest while you are in school. However, if you are not in school or your grace period is over, then your loan will start accruing interest which can be high as 6% from the date of disbursement. This can be reduced if you pay back your loan timely and on time every month.

what is the interest rate on subsidized student loans

We begin with what is the interest rate on subsidized student loans, then subsidized vs unsubsidized loans, unsubsidized loan interest rate, stafford loan interest rate and parent plus loan interest rate.

The interest rate on subsidized student loans can be a little confusing. That’s because there are two different rates that you might hear about: an interest rate for subsidized student loans, and the fixed annual percentage rate (or “FAVR”) for subsidized student loans.

The first is what you pay each year on your loan balance; it’s also called the “principal amount.” The second is what you pay each year in interest, over and above the principal amount. This is also known as your “interest charge.”

If you have a subsidized loan but don’t know whether or not your loan is subsidized, you can find out by looking at the promissory note that came with your loan agreement. If it says “Subsidized” under line 2b, then yes! Your loan is subsidized. If not? Sorry! You don’t have a subsidized loan.

There’s no way to tell how much interest will accrue over time, because it depends on when your payments start and how long they take to pay off—but we do know that you will never owe more than $27,500 (or $28,500 if you took out Stafford Loans for graduate school).

Subsidized vs Unsubsidized Student Loans: How do the interest rates work? |  Marca

subsidized vs unsubsidized loans

Now we consider subsidized vs unsubsidized loans, unsubsidized loan interest rate, stafford loan interest rate and parent plus loan interest rate.

Subsidized loans are better in some ways and worse in others, but the main difference is that interest doesn’t accrue while you’re enrolled at least half time in college. If you have a subsidized loan, your school will pay your interest while you’re in school. Having an unsubsidized loan means that you’ll be responsible for paying back the interest every month.

The amount of money you can borrow from each type of loan varies depending on what year it is and whether or not you’re a dependent student. The amount of your annual loan limit will be based on how much money your family makes per year, as well as other factors.

If you take out more than one loan, any remaining balance after graduation must be paid off within ten years (for undergraduate loans) or 20 years (for graduate student loans). If you don’t pay off the full amount on time, your loan servicer may charge late fees (which can get expensive!)

If you’re planning to attend college soon and need help paying for it, then consider applying for an education loan today!

unsubsidized loan interest rate

More details coming up on unsubsidized loan interest rate, stafford loan interest rate and parent plus loan interest rate.

Direct Loan Interest Rates for 2022-2023

On May 11, 2022, the Treasury Department held a 10-year Treasury note auction that resulted in a high yield of 2.943%. The chart below shows the interest rates for Direct Subsidized Loans, Direct Unsubsidized Loans, and Direct PLUS Loans first disbursed on or after July 1, 2022 and before July 1, 2023.

Interest Rates for Direct Subsidized Loans,
Direct Unsubsidized Loans, and Direct PLUS Loans
First disbursed on or after July 1, 2022 and before July 1, 2023

Loan Type10-Year
Treasury Note
High Yield
    Add-On    Fixed Interest
Rate
Direct
Subsidized
Loans and Direct
Unsubsidized
Loans for
Undergraduate
Students
2.943%2.05%4.99%
Direct
Unsubsidized
Loans for
Graduate and
Professional
Students
2.943%3.60%6.54%
Direct PLUS
Loans for
Parents of
Dependent
Undergraduate
Students and for
Graduate or
Professional
Students
2.943%4.60%7.54%

Thank you for your continued support of the Federal student assistance programs.

stafford loan interest rate

Stafford loans are a great way to fund your education, but it’s important to know how they work.

Subsidized and unsubsidized Stafford loans are available for students in college or graduate school. The difference between them is that subsidized loans are given out at an interest rate of 3.76%, while un-subsidized Stafford loans have an interest rate of 6.66%.

Subsidized loans are based on financial need, while unsubsidized loans require no proof of need and are available to all students regardless of their financial situation.

The main difference between the two types of loans is that subsidized loans don’t accrue interest while students are enrolled in school at least half time, whereas un-subsidized Stafford loan do accrue interest as soon as they’re disbursed (including during periods when students are enrolled full-time).

Subsidized vs. Unsubsidized Student Loans: Know the Difference

parent plus loan interest rate

Current interest rate: 6.28%

Direct PLUS Loans first disbursed on or after July 1, 2021, and before July 1, 2022, have a fixed interest rate of 6.28%.

Parent PLUS borrowers are eligible for the following repayment plans:

Standard Repayment Plan: This plan is the most common and affordable option. Your monthly payments are based on a fixed interest rate and may be lower than other plans. However, you’ll pay more interest over time because your monthly payments are less each month.

Graduated Repayment Plan: This plan is typically more expensive than the Standard Repayment Plan but may be helpful if you expect to earn more money in the future (for instance, if you’re going back to school or working toward a promotion). Your monthly payment amount will increase through an “in-school” period, then decrease when your loan enters repayment in full.

Extended Repayment Plan: If you want to make smaller monthly payments over a longer period of time, this plan may be right for you. It allows you to pay off your loan over up to 25 years (10 years for loans under $30K).

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