Student loans are generally divided between tuition fees and living costs. At the upper-level end of the scale, these loans usually include grants and loans, along with the annual interest charge. In general, the interest rate charged is the lesser of 1.25% or the prime rate, which is currently 2.59%.

At the lower-level of the scale, interest rates are lower. These loans include loans for private loans and work-study, along with the annual interest charge. In general, interest rates charged are the lesser of 1.25% or the prime rate, which is currently 2.59%.

Unsubsidized loans

Subsidized loans make up a larger percentage of student loans than subsidized loans. In fact, nearly 60% of all student loans in the United States are subsidized.

The federal government pays these loans back, providing a lower interest rate than the prime rate of 2.59%. However, even if the subsidized loans don’t end up paying back at the lower rate, you’ll still benefit from the lower interest rate. The subsidized loans may not pay the full amount that you borrowed, but as a result of your interest payments you won’t have to make as much money on those loans to pay off the principal. Unsubsidized loans are a bit more complex to figure out because each of these loans has different rules that you must follow. In general, most of these loans are disbursed in the form of one lump sum over 12 to 24 months. However, if the subsidized loan is for a loan that is not a one-time event, then it can be a disbursement over six months. In either case, you’ll have to make the regular payment for the remainder of the loan term.

According to companies like SoFi, the amount of interest you’ll pay on a subsidized loan depends on the loan term, amount borrowed and the interest rate. The maximum amount that you can borrow on a subsidized loan for the term of your subsidized loan is the difference between the two amounts of interest you pay during the subsidized loan’s term. A subsidized loan for a term of 12 to 24 months can have an interest rate of 12.25% per year, while a subsidized loan for a term of 18 to 24 months has an interest rate of 15.25% per year. These rates are fixed for the entire subsidized loan term.

Your loans cannot exceed the maximum limit.

If you’re eligible to receive subsidized loans, you are usually eligible for interest-free loans for the same term (up to a limit) that your loans provide. See if you qualify for interest-free loans.

For further information, see the FAQs for interest-free loans.

Help with loan payments and fees

If you’re having difficulty with your subsidized loans, you can contact your loan servicer for help. The Federal Direct Loan Servicer is the entity that holds the financial responsibility for subsidizing your loans.

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