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Subsidized student loans are those federal government funded student loans that provides financial support to students by offering a waiver on their interest payment until graduation is completed. The interest rates on these loans are much lower as it is backed by non profit organization or the Federal government. The primary aim of offering a subsidized loan is to promote education at different levels.
Basis of subsidized students’ loan
A subsidized loan is awarded based on the following two criteria namely,
- Based on Merit:
Subsidized loans are awarded to students who have exhibited exceptional performance in their studies, thereby promoting students with excellent capacities and generating value to the institution.
- Based on Need:
Subsidized student loans are offered to need based applicants, who are underprivileged students with little or no economic possibility of affording a college education without the help and support of federal or private financial aid. The aim is provide equal studying opportunities to students and awarding further/ additional funds for higher education.
Classification of Subsidized Student Loans
Major classification of subsidized student loans is :
- Subsidized Federal/Graduate Stafford Loan
- Perkins Loan
Borrowing Limit
Subsidized loans generally have tight cap on the loan amounts borrowed every year and are dependent upon the academic performance or financial status. Most of these subsidized loans require certification from school authorities confirming their financial status. No credit checks are required as they are generally need based loans.
Repayment of Subsidized Loans
While the student loans are subsidized with no obligation to pay interest until the completion of their graduation, the repayment period begins six months later to their graduation. The students are liable to pay both the interest and the principal.
Sources of Subsidized student loans
Different government and private agencies offer explanations and guidance to students about the various study programs and their respective requirements. A quick search on the net would give you a list of subsidized loan categories.
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