Subsidized Versus Unsubsidized Federal Student Loans - What's the Difference? Ameritech Financial Offers Clarity

News provided by

May 09, 2018, 08:00 ET

ROHNERT PARK, Calif., May 9, 2018 /PRNewswire/ -- It takes a lot to fund a college education. To qualify for federal aid, which is the most common way to pay for college, students must fill out the FAFSA each year. The information put into that form informs schools in their decision on what cocktail of financial aid to offer to each student. While each school may offer its own grants, tuition discounts or state-based aid, students can fill in any gaps using federal aid. About 70 percent of students leave college with federal student loans. Ameritech Financial is a document preparation company that helps federal student loan borrowers with applications for federal repayment plans that are intended to help them pay their student loans.

"Federal student loans are often necessary for students to attend college, and such students might not look too closely at the loans they must take out," said Tom Knickerbocker, executive vice president of Ameritech Financial. "While federal loans don't usually have bad terms relative to private offerings, it's worthwhile to look at the details of the loans you'll spend varying years of your future paying down."

Federal student loans can be either subsidized or unsubsidized. While they are nearly the same thing — they have the same loan terms and interest rates — they differ in one key way. Unsubsidized loans accrue interest during deferment, while the government pays the interest on subsidized loans during certain deferment periods. That means that unsubsidized loans accrue interest during students' time at school, which gets added to the original balance at the beginning of repayment.

According to a recent study, only a little more than a third of Gen Z participants knew that unsubsidized loans accrue interest during school, while only a quarter knew that subsidized loans do not accrue interest. However, knowing which type of loans accrue interest may inform borrowers' decisions. Students with unsubsidized loans, for example, may choose to make interest-only payments during school to minimize the amount that they will be responsible for paying back after graduation.

Both types of federal loans are eligible for many current repayment plans through the Department of Education. Borrowers who need a short-term reprieve from payments may enter into deferment or forbearance in which interest may still accrue depending on loan type. Those who need a long-term solution to unaffordable payments may apply for an income-driven repayment plan (IDR), which bases payments on income and family size and may end in forgiveness after 20 to 25 years in the program.

"Unsubsidized loans might demand more money over the years than subsidized loans, but they are just as manageable," said Knickerbocker. "At Ameritech Financial, we help any federal loan borrower understand IDRs in the context of their student loan and personal financial situation and help them with the application paperwork if they decide to pursue one of the options."

About Ameritech Financial

Ameritech Financial is a private company located in Rohnert Park, California. Ameritech Financial has already helped thousands of consumers with financial analysis and student loan document preparation to apply for federal student loan repayment programs offered through the Department of Education.

Each Ameritech Financial telephone representative has received the Certified Student Loan Professional certification through the International Association of Professional Debt Arbitrators (IAPDA).

Ameritech Financial prides itself on its exceptional customer service.

Ameritech Financial Newsroom

Contact

To learn more about Ameritech Financial, please contact:

Ameritech Financial
5789 State Farm Drive #265
Rohnert Park, CA 94928
1-800-792-8621
[email protected]

Related Images

subsidized-versus-unsubsidized.jpg
Subsidized Versus Unsubsidized Student Loans
Credit: TeroVesalainen/Bigstock

image2.png

Related Links

Ameritech Financial home page

SOURCE Ameritech Financial