Are unsubsidized student loans an option for you?

If your family needs to borrow money to pay for college or graduate school, you're far from alone. Seven in 10 college graduates complete their schooling with a "significant" amount of debt. For many college students, that support comes from Direct Unsubsidized student loans made by the federal government. Your child may be eligible for this flexible way to finance school, but you'll want to carefully weigh the options before locking in.

Subsidized loans vs. unsubsidized loans

The federal government's Direct Loan Program includes Direct Subsidized loans, in which the government covers the cost of interest over the span of time spent in school, or in a qualified deferment. However, these are only available to students who demonstrate financial need. Households that don't qualify for a subsidized loan may be eligible for Direct Unsubsidized student loans.

The application doesn't ask for credit history, so your student doesn’t need to have a credit history or strong financial record to get an unsubsidized loan. There's also no need to apply with a cosigner, mitigating risk for other family members.

How much your child can get depends on their situation. Your child’s school will determine the amount they can borrow each year based on the cost of attendance as well as any financial aid you receive. For a first time borrower, their maximum in unsubsidized loans is $5,500, and amount will incrementally increase with each year they're in school. As an example, if your school’s cost of attendance is $30,000, generally the maximum a student can borrower for their freshman year is $5,500. With an unsubsidized loan, students are responsible for paying the interest while they're in school. If the student chooses not to pay the interest or to “defer” the interest during school or grace periods, the interest will accumulate on top of the loan principal.

There's an educational career borrowing limit of up to $57,500 for unsubsidized student loans for dependent undergraduates and $138,500 for graduate or professional students.

Getting started

In order to qualify to receive Direct Unsubsidized student loans, the student must be enrolled at least half time in a degree or certificate program in a school that participates in the Direct Loan Program. Once your child has completed the Free Application for Federal Student Aid (FAFSA®), the school will determine how much aid a student is eligible to receive. In addition to the interest, there's a loan origination fee that will deduct from your disbursed loan.

Paying it off

Upon graduation, if the student choses to defer repayment, they'll receive a six-month grace period before full monthly repayment begins. Most borrowers have 10 to 25 years to pay off the loan. The Direct Loan Program offers a number of different plans for repayment, including options for deferment or forbearance if the borrower meets special circumstances. Your child can also refinance your loan if and when the time is right.

Made ready for college

Click here for more information about how to pay for college. You can also call 1-888-411-0266 or stop by your nearest Citizens branch.