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Unsubsidized Loan
Definition
A federal student loan where interest accrues from the day the loan is disbursed.
Explanation
Unsubsidized loans are available to undergraduate and graduate students regardless of financial need. Interest starts accruing immediately, even while enrolled in school. You can pay interest while in school or let it capitalize (add to principal) later.
Because interest accrues during school, unsubsidized loans cost more overall than subsidized loans.
Example
You borrow $5,000 at 5% APR. During 4 years of school, interest accrues ~$250/year. If unpaid, balance upon graduation = $5,000 + ~$1,000 accrued interest = $6,000.