Subsidized and Unsubsidized Loan Calculator

Subsidized vs. Unsubsidized Loan Calculator

Understanding Subsidized vs. Unsubsidized Loans

When pursuing higher education, understanding the different types of student loans available is crucial. Two common types, especially for federal student loans, are subsidized and unsubsidized loans. While both provide funds for educational expenses, their key difference lies in how interest accrues and who is responsible for paying it during certain periods. This calculator helps you compare the total cost of these loan types over their lifetime.

Subsidized Loans

Subsidized loans are need-based federal loans primarily for undergraduate students. The U.S. Department of Education pays the interest on a subsidized loan for specific periods, including:

• While you are in school at least half-time.
• During the grace period (the first six months after you graduate or drop below half-time enrollment).
• During periods of deferment (postponement of loan payments).

Because the government covers interest during these times, your total repayment amount will generally be lower than with an unsubsidized loan, assuming the same principal amount, interest rate, and loan term.

Unsubsidized Loans

Unsubsidized loans, also known as non-need-based loans, are available to undergraduate and graduate students regardless of financial need. With an unsubsidized loan, interest begins to accrue from the moment the loan is disbursed. This means:

• Interest accrues while you are in school.
• Interest accrues during the grace period.
• Interest accrues during periods of deferment.

You are responsible for paying all the interest that accrues on an unsubsidized loan. While you may have the option to defer payments on the principal, the accrued interest will continue to accumulate. If you do not pay the interest as it accrues, it will be capitalized (added to your principal balance), leading to a higher total repayment amount.

How the Calculator Works

This calculator estimates the total amount paid for both subsidized and unsubsidized loans. It assumes:

• The loan principal is the same for both loan types.
• The loan term is the same for both loan types.
• The interest rates provided are accurate annual rates.

For subsidized loans, the calculator calculates the total principal repayment. For unsubsidized loans, it calculates the total principal plus the accumulated interest over the loan term, assuming interest is not paid during the in-school period, grace period, or deferment, and thus capitalized. The formula used is a standard amortizing loan payment formula (M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1] ) to find the monthly payment, and then multiplied by the total number of payments to get the total paid. For unsubsidized loans, the interest accrued during non-payment periods is added to the principal before calculating the total repayment.

Key Differences to Consider:

• Interest Accrual: The primary difference. Subsidized loans have interest paid by the government during certain periods; unsubsidized loans accrue interest from disbursement.
• Cost: Generally, subsidized loans are cheaper due to the government paying interest.
• Eligibility: Subsidized loans are need-based; unsubsidized loans are not.

Use this tool to compare potential repayment scenarios and make informed decisions about your student financing.

Subsidized Loan Total Paid:

$" + subsidizedTotalPaid.toFixed(2) + "

(Includes $" + subsidizedTotalInterest.toFixed(2) + " in interest)

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Unsubsidized Loan Total Paid:

$" + unsubsidizedTotalPaid.toFixed(2) + "

(Includes $" + unsubsidizedTotalInterest.toFixed(2) + " in interest)

Difference: