SIFE Financial Corner

Each week, the Students in the Free Enterprise (SIFE) Team from the Henry W. Bloch School of Management, with assistance from a group of respected business people, will answer your financial questions.

Cody Johnson, major undecided, wants to know the difference between federal and private student loans. He also wants to know the difference between subsidized and unsubsidized Stafford loans.

Private Loans

Private loans are provided by a specific lender, like a bank, and are not federally supported.

These loans usually have a higher variable rate of interest than their federal counterparts, and many require a monthly payment while in school.

Also, in order to obtain most private loans, a credit check is required before the money is deposited into your bank account.

Federal Loans

Federal loans, on the other hand, are supported by the federal government and usually have low fixed interest rates.

These loans offer flexible repayment plans, most of which do not start until after the student has finished school.

These federal funds are provided to you through your school and are not deposited into your personal bank account.

Subsidized Loan

A subsidized Stafford loan is a need-based loan with low interest, determined by your Free Application for Federal Student Aid (FAFSA).

There is no credit check required to receive this loan.

For this specific type of loan, the federal government pays your loan interest up through six months after the student is no longer enrolled in school at least half-time.

Unsubsidized Loan

An unsubsidized Stafford loan also has a low interest rate and is available to all students regardless of financial need. This loan also does not require a credit check in order to receive the funds.

The major difference between this loan and the subsidized Stafford is that the student is responsible for paying the interest, which may be paid while in school or accrued and added to the loans principle and repaid by the student at the time of repayment.

Repayment for this loan also begins six months after the student is no longer enrolled in school at least half-time.

E-mail your questions to the Students in Free Enterprise team at [email protected]