Answered By: Lisa Raymond
Last Updated: Aug 04, 2022     Views: 16

To receive either type of loan, you must be enrolled at least half-time at a school that participates in the Direct Loan Program. Generally, you must also be enrolled in a program that leads to a degree or certificate awarded by the school.

Subsidized loans are available only to undergraduate students who have financial need. Unsubsidized loans are available to both undergraduates and graduate or professional degree students. You are not required to show financial need to receive an unsubsidized loan.

What is the difference between subsidized and unsubsidized loans?

Subsidized Loans

  • Direct Subsidized Loans are available to undergraduate students with financial need.
  • Your school determines the amount you can borrow, and the amount may not exceed your financial need.
  • The U.S. Department of Education pays the interest on a Direct Subsidized Loan
    • while you’re in school at least half-time,
    • for the first six months after you leave school (referred to as a grace period), and
    • during a period of deferment (a postponement of loan payments).

Unsubsidized Loans

  • Direct Unsubsidized Loans are available to undergraduate and graduate students; there is no requirement to demonstrate financial need.
  • Your school determines the amount you can borrow based on your cost of attendance and other financial aid you receive.
  • You are responsible for paying the interest on a Direct Unsubsidized Loan during all periods.

For more information, visit Federal Student Aid: Subsidized and Unsubsidized Loans

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