Financial Aid Paying for College

Subsidized vs. Unsubsidized Student Loans: What is the Difference?

Written by CB Community

If you’re about to enroll in college, you probably realize that student loans will be a big part of your life.

But with all the terms and conditions, it can get overwhelming quickly, especially when figuring out which type of loan is best for your situation.

What’s the difference between subsidized and unsubsidized loans, and does it matter when you compare personal loan rates?

What Are Subsidized Student Loans?

Subsidized student loans are loans where the government pays the interest while the student is in school.

Subsidized loans are only available for undergraduate students who meet specific financial criteria that show they have a need for financial aid.

Each school determines the maximum amount of subsidized loans a student can take, but it typically ranges from $5,500 to $12,500 per year.

To be eligible for a subsidized loan, you must:

  • Be enrolled in a school that participates in the government’s Direct Loan program for at least half-time
  • Show a financial need
  • Be a U.S. citizen or eligible non-citizen
  • have a valid Social Security number
  • Be enrolled in an eligible degree or certification program

What Are Unsubsidized Student Loans?

Unsubsidized student loans are loans that are not based on financial need. Interest accrues on unsubsidized loans while you are in school.

Both undergraduate and graduate students are eligible for unsubsidized loans, and there are no financial aid requirements to meet to receive one. Students can receive up to $20,500 in unsubsidized loans per year.

To be eligible for an unsubsidized student loan, you must:

  • Be enrolled at least half-time in an eligible degree or certificate program
  • The university or school must participate in the government’s Direct Loan program

The Difference Between Subsidized and Unsubsidized Student Loans

The biggest difference between subsidized and unsubsidized involves whether or not the student is responsible for paying interest while registered in a university.

Subsidized student loans are need-based loans that are awarded to students with financial needs. The federal government pays the interest on these loans while the student is still in school.

There are caps on how much you can receive in subsidized loans that range from $5,500 to $12,500 per year, and only undergraduate students qualify.

Unsubsidized student loans are not need-based, and the borrower is responsible for paying the interest on the loan while they are in school.

Both undergraduate and graduate students can receive unsubsidized loans up to $20,500 per year.

What if I Can’t Get Enough Student Loan Money to Pay for School?

If you cannot pay for school solely through student loans, consider applying for private loans from a lender.

You can also apply for scholarships, grants, and work-study programs that reduce the amount of tuition you owe and may even give you a small stipend for living expenses.

The Bottom Line

Student loans can be a great way to get ahead in life, but it’s essential to choose the right type of loan for your needs.

Unsubsidized loans are expensive but more readily available, while subsidized loans are much more affordable and easier to manage but harder to get if your family’s income is too high.

About the author

CB Community

Passionate members of the College Basics community that include students, essay writers, consultants and beyond. Please note, while community content has passed our editorial guidelines, we do not endorse any product or service contained in these articles which may also include links for which College Basics is compensated.