I will share the difference between federal subsidized and unsubsidized loans. You can keep the loan after 6 months of leaving school. Do read all eligibility criteria.Difference Between Federal Subsidized And Unsubsidized Loans

The college fees are very high, so many students need loans to cover their tuition. Both subsidized and unsubsidized loans fall in the category of federal student loans. They are given to eligible students that satisfy specific criteria to help them cover their education. Both types need to be paid back together with interest. However, the critical difference is that the government will partially cover the interest for the subsidized loans.

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They offer a wide range of benefits for students, so this is why they provoke interest. In This post, we explain the difference between federal subsidized and unsubsidized loans. Once you go through it, you will have a clear idea about the difference.

Difference between federal subsidized and unsubsidized loans

Subsidized loans

The critical difference is that the federal subsidized loans offer slightly better conditions for students with a financial need. You are eligible to borrow the exact amount that corresponds to your needs. Although both subsidized and unsubsidized come with advantages, subsidized loans extend the benefits range to a partial interest coverage by the government. The government will pay for the interest in the following situations:

  • Six months after leaving school
  • For the duration of the school
  • In case the loan payments get postponed

Unsubsidized loans

The federal unsubsidized loans are available for all students, and they don’t need to disclose proof of financial need. The only difference is that you will pay the interest for the loan by yourself. While the government offers help to pay the interest for subsidized loans, they don’t provide the same or unsubsidized. In case you fail to pay the interest, it will be added to your principal.

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Is there a limit for federal subsidized and unsubsidized loans?

Your school will determine the amount of money that you will receive as a loan. However, keep in mind that there are certain limitations when it comes to borrowing through federal loans.

There are limits on the amount of money you can borrow each year and the total for your studies. However, the limitations will depend on whether you are an independent or dependent student and which school year you are.


Students that want to use the benefits of the federal loans need to fulfill specific criteria. You need to be at least a half-time student in an institution that participates in the direct loan program. To be eligible for a federal subsidized loan, you need to show proof of financial need. However, this isn’t required for an unsubsidized loan. To apply for a federal loan, you need to complete and submit the required form. Based on this information, your school will determine how much money you can borrow.

What happens if you lose eligibility for deferral subsidies loans?

When you have already received a subsidized loan, you are no longer eligible for another direct subsidized loan for the defined period. Nevertheless, you are eligible for an unsubsidized loan.

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However, have in mind that some actions might result in losing your eligibility and leaving you with the responsibility to pay the interest. In case you don’t pay your interest, the amount will be capitalized. What does this mean? Capitalized interest means that the amount will be added to your principal, which will increase your monthly payments and increase the amount of interest you pay in the long run. The unpaid interest is added to your debt, and again the interest is calculated to that amount.

Final thoughts

The federal subsidies loans come with a unique benefit, which means that the government is in charge of the interest. However, have in mind that they are strictly given to students that disclose proof of financial need. They both come with convenient repayment terms and low interest rates.