- Subsidized Loan
- Awarded on the basis of financial need, determined by the information you provide on the FAFSA (Free Application for Federal Student Aid)
- Federal government pays the accruing interest on the loan if you are in an in-school, or deferment status
- Unsubsidized Loan
- Not awarded on the basis of need
- Interest begins to accrue from the date the loan is disbursed, though you can choose to pay it later if you are in an in-school, grace, or deferment status
- If you don’t pay the accruing interest, it will be added to the principal amount of your loan and increase the amount you have to repay.
- If you pay the interest as it accumulates, you'll repay less in the long run.
Direct Subsidized loans will not be eligible for an interest subsidy during the six-month grace period. When the loan is in the six-month grace period after the student is no longer enrolled at least half time, or if the loan is in a deferment status. This provision eliminates the interest subsidy provided during the six-month grace period for subsidized loans for which the first disbursement is made on or after July 1, 2012, and before July 1, 2014. If you receive a subsidized loan during this timeframe, you will be responsible for the interest that accrues while your loan is in the grace period. You do not have to make payments during the grace period (unless you choose to) but the interest will be added (capitalized) to the principal amount of your loan when the grace period ends. This provision does not eliminate the interest subsidy while the borrower is I school or during eligible periods of deferment.
Interest rates vary depending on loan type, when the loan was first disbursed, and your degree status (undergraduate or graduate). See the interest rate chart for more information.
You have a variety of repayment options. Learn more.
Deferment and forbearance
Cancellation, forgiveness, and discharge
Important note about Federal Stafford Loans and the Federal Family Education Loan Program: Beginning July 1, 2010, the more common loan types are Direct Subsidized and Unsubsidized Loans available through the William D. Ford Federal Direct Loan Program. The U.S. Government makes these loans directly through schools.
If you borrowed prior to July 1, 2010, you may have a Federal Stafford Loan (subsidized or unsubsidized) from the Federal Family Education Loan (FFEL) Program. (Under the FFEL Program, private lenders such as banks, credit unions, and savings and loan associations made the loans.) Although the FFEL Program and Stafford Loans no longer are available, existing loans remain active.