Subsidized and unsubsidized loans are types of loans available to eligible students to help cover the cost of college or career school. Here are the key differences between subsidized and unsubsidized loans:
Subsidized Loans
- Only available to undergraduate students.
- Based on financial need.
- The federal government pays the interest while you are in school at least half-time or during deferment periods.
- Lower loan limit compared to unsubsidized loans.
Unsubsidized Loans
- Available to both undergraduate and graduate students.
- Not based on financial need.
- Interest is charged during in-school, deferment, and grace periods.
- You are responsible for the interest from the time the unsubsidized loan is disbursed until it’s paid in full.
- Higher loan limit compared to subsidized loans.
Both types of loans are distributed as part of the federal direct loan program and have a low, fixed interest rate. To be eligible for either type of loan, you must complete a FAFSA (Free Application for Federal Student Aid) . If you qualify for a subsidized loan, it is generally recommended to take that financial aid since it will save you money. However, if you dont qualify, you can still apply for an unsubsidized loan.
