There are two types of federal loans offered in financial aid packages for college students: subsidized and unsubsidized loans. Borrowers are often advised to accept subsidized loans before unsubsidized loans, but those who didn’t look closely before accepting loans may be surprised to discover there was a difference. Ameritech Financial, a document preparation company that specializes in helping borrowers apply for federal repayment plans, recognizes that any loan can become unmanageable and helps borrowers with both unsubsidized and subsidized federal loans situate themselves for financial success in one of the many available repayment plans.
Unsubsidized loans and subsidized loans are very similar. They are both federal loans and have the same repayment options. For undergraduate students, they even have the same interest rates. The main differences involve interest accrual and graduate school funding. This is where unsubsidized loans get more expensive.
“Debt can be overwhelming, especially if the terms of the loan were unclear to you, or you were surprised by your balance,” said Tom Knickerbocker, Executive Vice President at Ameritech Financial. “When you do understand your debt, it’s much easier to manage it or come up with a good plan to tackle it.”
Because borrowers are responsible for all interest accrued on unsubsidized loans, starting at disbursal, they do end up being more expensive than subsidized loans. Depending on how much is borrowed, unsubsidized loans can result in a repayment balance thousands of dollars higher than the amount disbursed. Furthermore, they tend to be more expensive for graduate students as the interest rate and borrowing limits are much higher. Subsidized loans are also not available to graduate students.
Unsubsidized loans can be a bit more difficult to pay off in part because of the interest that capitalizes at the beginning of repayment. What do borrowers do if the payments are too high? Ameritech Financial suggests avoiding deferment and forbearance unless borrowers only need a temporary solution; even for a temporary solution, borrowers should consider making interest-only payments if they can so they don’t come back to a higher balance and payment due. Unlike for subsidized loans, unsubsidized loans continue to accrue interest while deferred, so it’s not a good long-term solution.
Instead, the Department of Education offers several repayment plans that might be better, including many that base the monthly payment on income and family size. Each repayment plan has its own requirements and terms and may even end in loan forgiveness if there is any balance left at the end of the term. While choosing a repayment plan may be confusing for some borrowers, Ameritech Financial reminds them that there is help available to them.
“Borrowers often get stuck weighing their options with the many repayment plans available to them,” said Knickerbocker. “Add that to their existing confusion about the types of loans they have and it could be overwhelming. At Ameritech Financial, we help borrowers understand it all and help them apply for the repayment plan that best suits their needs.”
About Ameritech Financial
Ameritech Financial is a private company located in Rohnert Park, California. Ameritech Financial has already helped thousands of people with financial analysis and student loan document preparation to apply for federal student loan repayment programs offered through the Department of Education.
Ameritech Financial is a member of the Association for Student Loan Relief (AFSLR), and each representative on the phone has received the Certified Student Loan Professional certification through the International Association of Professional Debt Arbitrators (IAPDA).
Ameritech Financial prides itself on its exceptional Customer Service.
Options are available to help
Most people do not realize that there are programs designed to help those who may be struggling with their student loan payments. Thousands of borrowers have trusted Ameritech Financial to be their advocate. Click here to find out what options are available. Our services could help you get back on track.Get Started Learn More