- Subsidized loans save you money because the government pays your interest while you are in school.
- Unsubsidized loans are open to almost all students but begin accruing interest immediately.
- Subsidized loans are only offered to undergraduate students with financial need.
As earning a college degree becomes more expensive by the year, more and more students are relying on federal student loans to keep the dream alive. When you get your award letter, you may see listings for both subsidized and unsubsidized student loans.
However, all the language used to describe the different types of loans available to you can seem like coded language, right?
In this article, we’re going to shake up that cloud of confusion.
Today we’re going to talk about the differences between the terms “subsidized” and “unsubsidized student loans” when it comes to the Federal Direct Student Loan Program.
The William D. Ford Direct Loan Program is the largest loan program offered by the U.S. Department of Education. It’s basically the “law” that determines what can and cannot be done with student loans.
Subsidized and unsubsidized loans are two of the four types of direct loans. These are the most common types of loans that college students will get. Let’s break down what it means, what you need to know, and the options if you need to borrow more.
Subsidized student loans
If you qualify for Federal Direct Subsidized Student Loans, you should definitely take advantage of them, as they are one of the best student loans you can get.
Unsubsidized student loans
Who is eligible for Direct Loans?
There are several factors you should be aware of when it comes to qualifying for direct student loans. There are also limits to the amount you can borrow with Direct Student Loans.
Something to note: Most male students need to register for A la carte service In order to obtain federal aid.
How much can you borrow?
There are different borrowing limits depending on whether you are a dependent student or an independent student. The limits also change depending on the academic year you are studying.
If the amount your school limits is more than you actually need, you can also borrow less money — something that will be helpful if your goal is to pay off your student loans faster.
When your loan is granted, it will be sent directly to your school who will then add the funds to your school account to pay your tuition and fees.
Here are the current student loan borrowing limits:
$5,500 – No more than $3,500 is supported | $9,500 – No more than $3,500 supported | |
Second year of university | $6,500 – No more than $4,500 supported | $10,500 – No more than $4,500 supported |
Third year of university and beyond | $7,500 – No more than $5,500 is supported | $12,500 – No more than $5,500 supported |
Note: All graduate and professional students are considered independent students. Graduate students and professionals are also not eligible for subsidized loans. These loans are also different from the Grad PLUS loan program, which was eliminated starting in July 2026.
There is also an overall loan limit you must follow:
Dependent students: $31,000, with support not exceeding $23,000
Independent students: $57,500 for undergraduate students, with support no more than $23,000
Graduate students: Starting in 2026, $100,000 for graduate students. Before June 2026, the total cap was $138,500.
Professional students: Starting in 2026, $200,000. Before June 2026, the total cap was $138,500.
How much time do you have to repay your direct loans?
With an unsubsidized student loan, once you graduate from school, you have a six-month “grace period” where you don’t necessarily have to make payments on your loan although you will have to pay any interest that has accrued on the amount you borrowed.
In most cases, subsidized student loan borrowers won’t have to worry about payments until the grace period ends.
Your repayment period begins one day after the grace period ends – this applies to subsidized and unsubsidized student loan borrowers.
Since you never want to miss your repayment start date, it’s important that you communicate clearly with your loan servicer for details about the exact date the repayment period will start, the amount you have to pay and payment methods.
If for some reason you cannot pay the interest within the six-month grace period (under the unsubsidized programme), the interest amount will be capitalized. This means that the interest amount will be added to the principal amount which may increase the amount you have to pay each month.
In general, you will have between 10 and 25 years to repay your student loans.
If you decide to consolidate your loans using a direct consolidation program, this time period will be extended up to 30 years.
For both subsidized and unsubsidized loans, you have the opportunity to use income-based repayment programs.
What if you need to borrow more?
Many people see the limits of subsidized and unsubsidized student loans for college students and don’t know how they will be able to pay for college. This is a reasonable fear if you plan to borrow the entire cost of college. But remember, paying for college is very easy, and there are lots of different segments you can choose from.
For full details of the ‘best’ way to pay for university, see this article: Best way to pay for university.
If you have already exhausted other options, and know your return on investment on education, you can look into private loans.
We recommend that students shop around and compare private loan options before taking out one. reasonable It’s an excellent option because you can compare about 10 different lenders in two minutes and see what you qualify for. Check credibility here.
We also have a full comparison tool on the best private loans to pay for college here.
Key takeaways
We’d love to hear your thoughts in the comments!
