Repaying Your College Loan

If you decide to pay for school with borrowed money, either from private or federal financial loans, there are some things you should know about the end game: paying them back.

Subsidized/Unsubsidized Loans...What's the Difference?

When applying for a college loan, you may see the term "subsidized" or "unsubsidized" floating around quite a bit. You should know the difference between them because the difference will probably mean a few hundred or thousand dollars in interest over the life of the loan.

Subsidized Loans

Subsidized loans are loans where the interest is paid for you (by the lender or other, anonymous 3rd party) for as long as you are in school. What that means to you is that if you borrow $5,000 in your first semester, by the time you graduate 4 years later, you will owe the lender $5,000 and only then will interest start adding to your loan over time as you make your payments.

Unsubsidized Loans

Unsubsidized loans are loans where the interest on the loan accrues against you from the moment you take out the loan until you have paid it off. You do not have to make any payments on the loan until after you graduate or drop below part-time, but the interest-clock is ticking. The upside to these loans is that you will usually be offered a greater amount of money than with subsidized loans. That, of course means more interest and ultimately more money to the lender.

Repayment Options

For both private and federal loans, you will usually be given the option of repaying your loans fairly quickly or extending the loan to a long-term repayment (which of course will increase the interest you have to pay). Under most circumstances the maximum time for repayment of loans will be 10 years which, depending on the size of your loan could still mean a substantial amount of change out of your monthly salary. Still have questions? Check to see if they have already been asked in our frequently asked questions.