Which statement differentiates unsubsidized loans from subsidized Stafford loans?

Which statement differentiates unsubsidized loans from subsidized Stafford loans?

• A. Unsubsidized loans accrue interest from disbursement; subsidized loans do not accrue interest while in school.
• B. Subsidized loans accrue interest immediately, while unsubsidized do not.
• C. Both require a government cosigner.
• D. Neither ever accrues interest during school.

Answer: (A)

Interest timing is what differentiates unsubsidized from subsidized Stafford loans. With unsubsidized loans, interest starts accruing as soon as the loan is disbursed, and you’re responsible for paying that interest at all times. If you don’t pay it during school, grace, or deferment, the interest is capitalized and adds to the principal, increasing the total amount you’ll repay. With subsidized loans, the government covers the interest during certain periods—typically while you’re in school at least half-time and during the grace period after you leave school—so no interest accumulates during those times. You’re not paying interest while in school under this type. So the statement that best differentiates them is that unsubsidized loans accrue interest from disbursement, while subsidized loans do not accrue interest while in school.

Interest timing is what differentiates unsubsidized from subsidized Stafford loans. With unsubsidized loans, interest starts accruing as soon as the loan is disbursed, and you’re responsible for paying that interest at all times. If you don’t pay it during school, grace, or deferment, the interest is capitalized and adds to the principal, increasing the total amount you’ll repay.

With subsidized loans, the government covers the interest during certain periods—typically while you’re in school at least half-time and during the grace period after you leave school—so no interest accumulates during those times. You’re not paying interest while in school under this type.

So the statement that best differentiates them is that unsubsidized loans accrue interest from disbursement, while subsidized loans do not accrue interest while in school.