College Qs: Understanding Different Types of Loans and Cal Grants

I am honestly lost right now, I have no clue what I’m doing with this whole “college thing”. It’s hard to get in touch with the counselor at my high school to ask questions about college. I’m all signed up for community college in CA for the fall, and I’m taking my placement exams, but I was wondering if you could answer some of my $$ questions.

1. What’s the difference between subsidized and unsubsidized loans?

2. What exactly is a Cal Grant? I missed the deadline for it because I wasn’t informed about it, but am I able to apply for it for next year too?

3. Should I sign up for general education classes or classes for my major?

Any help you can give me would be great.


Dear Almost-A-College-Student,

First off, congrats on starting the challenging but rewarding college experience. Since I’ve worked as an academic advisor and a college counselor in the past, I know how daunting this whole process seems. Just know that there are people ready to help you. I’m always happy to help students in need, but every college has a website with a financial aid section with FAQs, general info, and their office’s location and hours to help you as well. Don’t be afraid to ask them particular questions too because that’s what they are there for. In the meantime, let’s get your questions answered.

1. Subsidized Loans are available to undergraduates with financial need and your school uses your FAFSA (Free Application for Federal Student Aid) to determine how much you will need based on your parent(s)’ income, other aid you’re receiving, etc. This is borrowed money that you must pay back. Subsidized Loans are better because they have slightly better terms to help out students with financial need. Namely, you don’t have to pay interest on them while you are in school because The U.S. Department of Education pays the interest on a Direct Subsidized Loan as long as you’re in school at least half-time, and for the first six months after you leave school. (This is called a “grace period.”) Once you graduate, you will have to start paying them back by setting up a payment plan. Don’t worry, there are all types to meet your financial needs. But, with the monthly payment comes the interest that is added to what you owe. So, if you can pay more each month then you will pay it off faster and there will be less added interest to pay off too.

Unsubsidized Loans are available to undergraduate and graduate students, and you don’t have to demonstrate financial need to qualify for one (such as having to state how much money your parents make). Your school decides how much money you can borrow based on the cost of attending your college and other financial aid you receive. The bummer with this type of loan is that you are responsible for paying the interest on an unsubsidized loan during school and after. If you decide not to pay the interest while you’re in school and during the grace period, then your interest will accumulate and be added to the principal amount. In other words, what you originally owed will be added to with all of that collected interest, making the total that you owe grow until you pay it down and eventually, pay it off. 

To learn more, visit the Federal Student Aid website by clicking here, which was my source for this handy info.


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