Question

Time Value. On subsidized stafford loans, a common source of financial aid for college students, interest does not begin to accrue until repayment begins. who receives a bigger subsidy, a freshman or a senior? Explain with good example

Answer 1

Freshman will receives a bigger subsidy.Because , Subsidy means accrued interest immediately after the disbursement of loan amount will be borne by state or central government and this need not be paid by the borrower.

Under Student loans, the interest accrued during their studies i.e., before repayment begins will be borne by government.

A senior will not get bigger subsidy because he will start repaying the loan before that freshman begins to start.His tenure of studies will be less and accordingly he will get less subsidy than compared to Freshman.