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Debt Relief for Different Types of Student Loans: Subsidized vs Unsubsidized

In America, there are more than 46 million student loan borrowers contributing to the $1.75 trillion of national student loan debt. Millions of Americans are seeking student loan forgiveness or student debt cancellation every day, but not everyone is entitled to it. If you’re looking for a way to avoid student loan debt, or if you’ve already taken out student loans and are looking for student debt relief, it’s time to learn about the options available to you. Let’s look at the different types of student loans and student debt relief programs, and how they may impact your financial future. 

Subsidized and Unsubsidized Loans

One of the most commonly asked questions about student loans is what is the difference between subsidized and unsubsidized loans? Subsidized loans are undergraduate student loans for those with qualified financial need. Financial need is calculated based on your cost of attendance minus expected family contribution and other financial aid (such as grants or scholarships.) Student loan interest on subsidized loans does not accrue while you are attending school at least half-time or during deferment periods. 

Unsubsidized loans are not based on financial need and are available to both undergraduate and graduate students. Student loan interest is charged for the life of the loan, including while you are attending classes, during deferment, and during grace periods. 

The main difference between subsidized and unsubsidized student loans is that subsidized loans do not accrue interest while you are in school at least half-time or during deferment periods. Direct subsidized loans often have better terms. 

Students should apply any financial aid such as grants, scholarships, or gifts to the cost of their higher education before taking out a student loan. If a student loan is necessary, the best choice is most often a direct subsidized loan.

Types of Student Loans

Pursuing higher education is an investment in your future, but if you don’t research your options, you may wind up investing too much, for too long. Understanding the different types of student loans available to you can help you save money before you request the loan. 

There are student loan options available to you by federal banks and private lenders. The different types of student loans that they offer can have a major impact on how much you owe and the student loan forgiveness programs available to you. 

Federal Student Loans

There are five types of federal student loans: direct subsidized loans, direct unsubsidized loans, Parent PLUS loans, Graduate PLUS loans, and direct consolidation loans. 

Stafford Loans

The federal direct loan program, or Stafford loans, is available to both undergraduate and graduate students in either subsidized or unsubsidized structures. The difference between subsidized and unsubsidized loans helps determine your interest rate, maximum loan amount, and when you are required to repay your student loans. 

If you have Direct Stafford loans, you may be eligible for the following student debt relief options: 

  • Total and Permanent Disability Discharge
  • Discharge Due to Death
  • Discharge in Bankruptcy 
  • Borrower Defense to Repayment
  • False Certification Discharge
  • Unpaid Refund Discharge

PLUS Loans

PLUS loans are available to parents and graduate students. Parent PLUS loans are for the parents of undergraduate students who file as a dependent on their taxes. Graduate PLUS loans are for graduate students that need additional financial aid. PLUS loans help pay for education expenses that are not covered by other financial aid. 

If you have taken a PLUS loan for yourself or your dependent student, you may be eligible for student loan forgiveness or student loan discharge if the following apply:

  • You or the student passed away during their education program.
  • You (not the student) become totally and permanently disabled.
  • You did not apply for the student loan, as it was falsely certified by the school or falsely received through identity theft.
  • You (not the student) get the student loan discharged in bankruptcy.
  • The student for whom you borrowed did not complete the program because the school closed.
  • The student withdrew from school, but the school didn’t pay a refund of your loan money.

Direct Consolidation Loans

Students often receive loans from different providers every year, sometime every semester. To help reduce the number of lenders and monthly payments, students sometimes choose a direct consolidation loan. This allows you to make one monthly payment to one service provider.

While direct consolidation loans offer the convenience of having only one payment, if you don’t carefully review the terms, you may stretch your payments over a longer period of time and pay more in interest on the debt. You could also give up your eligibility for the student loan forgiveness programs’ interest rate discounts.

Before choosing this type of loan, carefully review its terms and conditions. Or consult a student loan attorney to help you understand the terms of the agreement and how you can reduce the amount of student loan debt that you owe.

Private Student Loans

Private student loans are meant for students who still need additional financial assistance, even with the money available to them through federal student loans and other financial aid. A student or a parent of the student can apply for a private student loan. 

Private student loans are similar to personal loans, meaning your eligibility for a loan is determined by your credit history. That said since the loan is granted by a private lender, these types of loans are not eligible for student loan forgiveness programs.

Your interest rate could be fixed or variable and is typically higher than with a federal student loan. Private loans are not subsidized, some require payments while you’re still in school, and deferment and forbearance options are limited.

Students and parents should carefully consider whether or not a private student loan is necessary. It is strongly encouraged to research available grants and scholarships before taking out a private student loan. A student debt relief attorney can help you determine if this is a prudent choice. Or if you already have a private student, a student loan attorney can review your contract to see if you qualify for debt consolidation or some type of student loan debt relief. 

Student Debt Relief Programs

If you’re one of the millions of Americans who have student loan debt, it may benefit you to review the different types of student loan debt relief programs that are available. If you qualify for a student loan forgiveness program, you could save thousands of dollars. 

Student Loan Forgiveness 

Depending on your income, career, and financial status, you may qualify for student loan forgiveness. However, there are strict eligibility criteria that you must meet to qualify for forgiveness.

Public Service Loan Forgiveness (PSLF) may be available to full-time employees who are employed by a government or not-for-profit organization. This type of loan is available only for direct loans. With the Public Service Loan Forgiveness (PSLF) Program, you must make 120 on-time payments toward the loan before the remainder can be forgiven. You can learn more about PSLF student loan forgiveness by reviewing, or by contacting a student loan forgiveness lawyer

Teacher Loan Forgiveness may be available to you if you have taught full-time for 5 complete and consecutive academic years in a low-income elementary school, secondary school, or educational service agency. This type of loan forgiveness applies only to Direct Loans or FFEL Program loans and you may be eligible for student loan forgiveness of up to $17,500.

There are other types of student loan forgiveness programs such as student loan forgiveness for healthcare workers, but these are the most common types of student debt relief options. If you are interested in learning more about what student loan forgiveness options are available to you, contact us today. Our student loan attorneys can help you find your path to financial freedom.

Student Loan Discharge

There are a number of ways to get a federal student loan discharge, otherwise known as student debt cancellation. This list is a good indicator as to whether or not you are eligible for a student loan discharge: 

  • Your school has closed.
  • You’ve declared bankruptcy.
  • You can claim total and permanent disability.
  • Unauthorized payment as a result of identity theft.
  • If your school has violated state law or is guilty of fraud.
  • The student has passed away.

If you believe you are entitled to student loan cancellation, contact a student loan lawyer. They’ll be able to review your financial situation and help you determine whether or not you should pursue a student loan discharge case. 

Free Consultation with a Florida Student Loan Lawyer

If you are struggling with student loan debt, we can help you find the right options to lower monthly payments. To learn more about your debt-relief options, schedule a free consultation with a student loan lawyer today by calling (954) 932-7804 or filling out the form below to get started.

Data via the Federal Reserve and the Federal Student Aid website.

Written By:

Attorney Robert Stiberman

Robert is an experienced bankruptcy attorney adept at handling Chapter 7, 13, and 11 filings, with more than 15 years of experience in bankruptcy cases. Robert represents clients in both consumer and business bankruptcy ... Read More

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