"Nearly a third of all college students take out student loans in their own name, according to Sallie Mae, a leading education lender. If you’re one of them, federal loans are by far the best choice," TIME reports. 

..."Federal Direct Subsidized and Direct Unsubsidized Loans are the two options available to undergraduate student borrowers. Direct Subsidized and Unsubsidized Loans don’t require credit checks or have minimum income requirements, making them useful options for students that may not have much income or credit history yet. These loans are taken out solely in the student’s name, and the student is responsible for repaying them — not the parents.

The major difference between unsubsidized and subsidized loans is interest, according to Jill Desjean, senior policy analyst with the National Association of Student Financial Aid Administrators. The government allocates money, or a subsidy, to cover interest on subsidized loans while the borrower is an active student.

'The student is not responsible for interest [on subsidized loans] while they’re in school or their grace periods,' Desjean says. This helps them save money upfront. Interest resumes once the borrower’s grace period ends, usually six months after graduation."

...“'With private loans, it’s possible that someone with very good credit or a co-signer may get a better interest rate,' Desjean says. 'However, private loans don’t have the same protections as federal loans.'”

NASFAA's "Notable Headlines" section highlights media coverage of financial aid to help members stay up to date with the latest news. Articles included under the notable headlines section are not written by NASFAA, but rather by external sources. Inclusion in Today's News does not imply endorsement of the material or guarantee the accuracy of information presented.

Publication Date: 2/21/2022