Try On Subsidized Stafford Loans

Subsidized is this year's black--it looks good on everyone.

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If you enroll in college at least half time, you can get Stafford Loans for your undergraduate, graduate, and professional studies through the Direct Loan program. Stafford Loans come in two shades: Subsidized and Unsubsidized. Subsidized is this year's black—it looks good on everyone.

[View FAQs about Stafford Loans.]

Subsidized Loans are good if you qualify for them, because the government pays the interest while you're in school and when you're in deferment. But whether you and your family are responsible for all the interest that will accrue or whether you can get a hand from the government depends upon your family's demonstrated financial need.

People from families that don't make a lot of money can qualify for Subsidized Stafford Loans, with government help to finance their education. Borrowers don't have to demonstrate financial need in order to get Unsubsidized Stafford Loans, but if your loan isn't subsidized, you have to pay all the interest. If you "need" it, you can get a Subsidized Stafford Loan.

Finaid.org reports that the majority of Subsidized Stafford Loans are awarded to students whose family's adjusted gross income is less than $50,000, and fewer than 10 percent of subsidized Stafford Loans go to students whose families report over $100,000 of adjusted gross income.

Even if you don't qualify for the subsidy, you can forgo making interest payments while you're in school. The problem is that the interest is then capitalized, or added to the principal of the loan. Capitalized interest isn't exactly fashion forward, since you then end up paying interest on interest. Interest, especially capitalized interest, gets expensive quickly.

[Learn 11 steps to relief from federal student loans.]

Interest and capitalized interest might not be a big deal if you have the financial resources to pay the interest as you go and avoid capitalization, but for those who aren't wealthy—but aren't exactly "needy" either—you may end up rather underdressed for the higher-ed occasion.

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