The Interest Clock Starts Early for Unsubsidized Loans

Both federal subsidized and unsubsidized loans charge interest during repayment — the difference is what happens while you are in school and during the six-month grace period. Subsidized loans are need-based and the government pays the interest that accrues during those months, so the balance you begin repaying equals what you borrowed. Unsubsidized loans are available to everyone, but interest accrues from the day the money is disbursed and is added to your principal when repayment starts. On a $30,000 loan at 6.5%, four years of school plus a six-month grace period can add thousands of dollars to the balance before your first payment is ever due — which is exactly the gap this comparison quantifies.