What Is a Subsidized Loan – Can I Use a Student Loan to Buy a Car?

What is a subsidized loan? How does a subsidized loan work? Do this kind of loan have limitation? Well, a subsidized loan is a federal student loan that is available to undergraduate students who have financial needs.

What Is a Subsidized Loan

This is simply a loan for undergraduate student who demonstrates financial needs as they carry out their studies. This type of loan does not accrue interest the same way as other loans do. Hence, as we go on with this article, we will be giving more details on it.

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What Is a Subsidized Loan

Just like we mentioned, this type of loan is a loan that is available for undergraduate students. It is a federal loan that takes care of student needs when they are applied for.

The amazing part of this loan is that the department of education takes care of your interest charges while you school and during the grace period after getting the loan. Well, as a student who wants a peaceful study, this is just the right way to get your financial problems solved.

What are the Interest Rates and Fees for a Subsidized Loan?

This loan charges the same interest rate as an unsubsidized loan. Hence, for an academic year, the interest rate on both of these federal loan is 4.99%. However, this you should not that postgraduate students are not allowed to take a subsidized loan.

Furthermore, both subsidized and unsubsidized loan charges are taken care of by the department of education when disbursing fees. This fee is removed from your loan payout.

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Who Qualifies for Subsidized Loans?

In other to be qualified for a subsidized loan, you will have to meet with needed requirements. This requirement includes:

  • First enrollment at least half-time at a school that participates in the federal direct loan program.
  • Next, the individual will have to be a United State citizen or eligible non-citizenship.
  • Possession of a valid social security number satisfactory academic progress.
  • No default on any federal loans.
  • Have a high diploma or an equivalent.

These and many more are what make you qualify for a subsidized loan.

How To Apply for a Subsidized Student Loan

Are you a student who needs financial assistance in your study? Would you want to take a loan that can help you take care of your school bills? Have you tried applying for a subsidized loan but it looks difficult?

If yes, you have nothing to worry about. Here are simple steps to consider when you want to apply for a loan:

  • Ensure you are a United State citizen or a Permanent resident.
  • Be enrolled in school for at least half-time studies.
  • Next, have defaulted or owe a refund to any previous student loan or aid.
  • Stay in good academic standing and lastly, have financial needs, which you will fill in the FAFSA loan form.
  • Review your application and submit it. When that is done, you will receive an award letter from your school financial aid office outlining the amount of aid you qualify for and whether you are qualified for it.

If the amount is ok by you, signing a promissory note that states you have agreed to the loan will be the next thing to do.

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What is Subsidized Loan VS Unsubsidized Loan

Unsubsidized loans are loans for both undergraduate and graduate students that are not based on financial need. Well, eligibility is given through your cost of attendance minus other financial aid. On the other hand, a subsidized loan is only available to undergraduate students as the latter is not.

Is a Subsidized Loan Free Money?

Is there free a subsidized loan? Federal subsidized loans do come with some fees. Hence, you will pay a loan fee based on a percentage of the loan amount, which is deducted from each payout. This is to simply say that the loan is not free.

How Does a Subsidized Direct Loan Work?

The government pays the interest on subsidized loans while you are in school up to six months after graduation. Subsidized loans have lower interest rates than unsubsidized loans. Unsubsidized loans can be used for graduate school. Unsubsidized loans can be used for graduate school. Well, you don’t need to state your financial need for this type of loan.

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Are Subsidized Loans Bad or Good?

The most amazing student loan recorded so far is the “subsidized loan” which the government pays the interest while the student goes to school. This is a quality that is quite unique to federally subsidized loans. Furthermore, the government will also pay the interest during the grace period and also during the deferment period.

Is There a Limit on Subsidized Loans?

Yes, there are limits to this loan. If you are an undergraduate the maximum combined amount of this loan you can borrow each year is between $5,500 and $12,500 depending on your year in school and your dependency status. However, institutions vary.

Can I Use a Student Loan to Buy a Car?

You can use student loans to pay for a college’s cost of attendance and the cost of attendance includes transportation, so can you use a student loan to buy a car? Well, the answer to that is a “No”. You can not buy a car with a student loan. If you live off campus, having a car may be needful but not necessary.



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