Which loan has no interest until 6 months after graduation as long as the student is enrolled half-time?
OPLUS loan.
Private loan.
Federal unsubsidized loan.
Federal subsidized loan.
The correct answer and explanation is:
The correct answer is Federal subsidized loan.
A Federal subsidized loan is a type of student loan offered by the U.S. Department of Education. It is specifically available to undergraduate students who demonstrate financial need. The key feature of a subsidized loan is that the government pays the interest on the loan while the student is enrolled at least half-time in school, during the grace period after graduation, and during deferment periods.
For Federal subsidized loans, students are not required to pay interest while they are in school at least half-time. After the student graduates or falls below half-time enrollment, the loan enters a grace period of six months. During this grace period, no interest accrues on the loan because the government continues to pay the interest. Only after the grace period ends will the student be required to start repaying the principal along with the accrued interest.
This feature makes the Federal subsidized loan advantageous compared to other types of loans, such as the Federal unsubsidized loan, where the borrower is responsible for the interest from the time the loan is disbursed. In the case of private loans or OPLUS loans (which are offered to graduate or professional students), the terms can vary widely and may not include the same benefits as the Federal subsidized loan, especially concerning the government paying the interest during school and the grace period.
Federal subsidized loans are designed to make education more affordable for students from lower-income backgrounds. However, eligibility for these loans is determined based on financial need, and they are only available to undergraduate students.