Unsubsidized Stafford Loan

An Unsubsidized Stafford Loan is a federally guaranteed loan that is not based on financial need. Interest will accrue from the time the loan is disbursed to the school. You do not have to make interest or principal payments until six months after graduation, or six months after you drop below a half time status.

Unsubsidized Stafford Loan Benefits

• Increased limits - borrow up to $2,000 more
• Fixed interest rate - 6.8%
• No payments required while enrolled in school

Unsubsidized Stafford Loan Interest Rate information

The current interest rate on an Unsubsidized Stafford loan is 6.8% fixed. Interest begins accruing after the loan is disbursed to the school. You are not required to pay the interest while you are in school, but doing so can save you money. If you choose not to pay the interest while in school then the interest is capitalized when the loan enters repayment after being in school, in your grace period, or after deferment.

What is capitalization?

This means that the interest that accrues is added to your principal loan balance, and interest then begins accruing on that new principal balance. You are essentially paying interest on interest. Here are two examples:

Example 1: You borrow a $6,000 Unsubsidized Stafford loan and you pay the interest every month for 4 years.

• Starting balance: $6,000
• Accrued interest: $0
• Balance when you start repayment: $6,000
• Monthly payment: $69.05
• Total interest paid on loan for all time: $2,285.69

Example 2: You borrow a $6,000 Unsubsidized Stafford loan and you defer the interest every month for 4 years.

• Starting balance: $6,000
• Accrued interest: $1,632
• Balance when you start repayment: $7,632
• Monthly payment: $87.83
• Total interest paid on loan for all time: $2,907.48

How much would it cost you to make the monthly interest payment in example 1? About $34/month. If you can manage to save or earn that much money during your four years of college, you could save yourself $621.79 in interest you won't have to pay back from capitalization.