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The Difference Between Subsidized and Unsubsidized Student Loans

When it comes to paying for college, many students turn to student loans to cover the cost of tuition, room and board, and other expenses. Two common types of student loans are subsidized and unsubsidized loans, and understanding the differences between them can help you make informed decisions about your college expenses.

What are Subsidized Student Loans?

Subsidized student loans are loans that the government pays the interest on while you are enrolled in school at least half-time, during your grace period (usually six months after graduation), and during any periods of deferment (when you temporarily stop making payments). These loans are available to undergraduate students who demonstrate financial need, as determined by the Free Application for Federal Student Aid (FAFSA).

What are Unsubsidized Student Loans?

Unsubsidized student loans are loans that accrue interest while you are enrolled in school, during your grace period, and during periods of deferment. Unlike subsidized loans, there is no financial need requirement for unsubsidized loans, and they are available to both undergraduate and graduate students.

What are the Differences?

The main difference between subsidized and unsubsidized student loans is the way that interest is handled. With subsidized loans, the government pays the interest while you are enrolled in school and during certain periods of deferment, which means that you do not accrue interest during those times. With unsubsidized loans, interest begins accruing as soon as the loan is disbursed, and you are responsible for paying that interest even while you are still in school.

Which Loan is Right for You?

When deciding between subsidized and unsubsidized student loans, it’s important to consider your financial situation and how much you can afford to repay in the long run. Subsidized loans can be a good option if you demonstrate financial need and want to avoid accruing interest while you are in school. Unsubsidized loans can be a good option if you don’t demonstrate financial need or need to borrow more than what is available through subsidized loans.


Understanding the differences between subsidized and unsubsidized student loans can help you make informed decisions about how to finance your college education. Be sure to weigh the benefits and drawbacks of each type of loan and consider your own financial situation before making a decision.

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