Difference Between a Federal Direct Subsidized and Unsubsidized Student Loan
The Federal Direct Subsidized Loan and the Federal Direct Unsubsidized Loan represent two types of loans made under the Federal Direct Loan Program.
Federal Direct Subsidized Loan
A Federal Direct Subsidized Loan is offered to a student based on his or her financial need.
The federal government pays the interest on behalf of a Federal Direct Subsidized Student Loan borrower under certain conditions:
- Federal Direct Subsidized Loans first disbursed on or after July 1, 2013 and before July 1, 2014 the federal government will not pay the interest during the loan’s six month grace period, per the federal government’s Consolidated Appropriation Act of 2012. The federal government will, however, still pay the interest for the borrower if he or she is enrolled at least half-time or has obtained an authorized deferment.
- For periods of enrollment on or after July 1, 2013, graduate and professional students cannot receive a Federal Direct Subsidized Loan per the federal government’s Budget Control Act of 2011.
Federal Direct Unsubsidized Loan
A Federal Direct Unsubsidized Loan does not require a student to demonstrate financial need.
- The student borrower of a Federal Direct Unsubsidized Loan is responsible for paying the interest that accrues on the loan from the time
of disbursement.
- Undergraduate, graduate, and professional students may qualify for a Federal Direct Unsubsidized Loan.