Subsidized and unsubsidized loans are federal student loans for eligible students to help cover the cost of higher education at a four-year college or university, community college, or trade, career, or technical school. The U.S. Department of Education offers eligible students at participating schools Direct Subsidized Loans and Direct Unsubsidized Loans.
What’s the difference between Direct Subsidized Loans and Direct Unsubsidized Loans?
In short, Direct Subsidized Loans have slightly better terms to help out students with financial need.
Here’s a quick overview of Direct Subsidized Loans:
- Direct Subsidized Loans are available to undergraduate students with financial need.
- Your school determines the amount you can borrow, and the amount may not exceed your financial need.
- For a subsidized loan, the U.S. Department of Education pays the interest
○ during a period of deferment (a postponement of loan payments).
*Note: If you receive a Direct Subsidized Loan that is first disbursed between July 1, 2012, and July 1, 2014, you will be responsible for paying any interest that accrues during your grace period. If you choose not to pay the interest that accrues during your grace period, the interest will be added to your principal balance.
Here’s a quick overview of Direct Unsubsidized Loans:
- Direct Unsubsidized Loans are available to undergraduate and graduate students; there is no requirement to demonstrate financial need.
- Your school determines the amount you can borrow by considering the cost of attendance and other financial aid you receive.
- For an unsubsidized loan, you are responsible for paying the interest during all periods.
- If you choose not to pay the interest while you are in school and during grace periods and deferment or forbearance periods, your interest will accrue (accumulate) and be capitalized (that is, your interest will be added to the principal amount of your loan).
Am I eligible for a Direct Subsidized Loan or a Direct Unsubsidized Loan?
You may be eligible if you are an undergraduate who is enrolled at least half-time at an eligible school in a program leading to a degree or certificate. If you are a graduate or professional degree student, you may be eligible to receive a Direct Unsubsidized Loan.
How do I apply?
How much can I borrow?
Your school determines the actual loan amount you are eligible to receive each academic year. However, there are limits on the maximum amount in subsidized and unsubsidized loans that you are eligible to receive each academic year (annual loan limit) and over your academic career (total loan limits). These limits depend on
- what year you are in school and
- whether you are a dependent or independent student.
If you are a dependent student whose parents are ineligible for a Direct PLUS Loan, you may be able to receive additional loan funds.
The following chart provides maximum annual and total loan limits for subsidized and unsubsidized loans as of July 1, 2012.
Dependent Students (except students whose parents are unable to obtain PLUS Loans)
Independent Students (and dependent undergraduate students whose parents are unable to obtain PLUS Loans)
$5,500—No more than $3,500 of this amount may be in subsidized loans.
$9,500—No more than $3,500 of this amount may be in subsidized loans.
$6,500—No more than $4,500 of this amount may be in subsidized loans.
$10,500—No more than $4,500 of this amount may be in subsidized loans.
Third-Year and Beyond Undergraduate
$7,500 per year—No more than $5,500 of this amount may be in subsidized loans.
$12,500 per year—No more than $5,500 of this amount may be in subsidized loans.
Graduate or Professional Degree Students
Maximum Total Debt from Subsidized and Unsubsidized Loans
$31,000—No more than $23,000 of this amount may be in subsidized loans.
$57,500 for undergraduates—No more than $23,000 of this amount may be in subsidized loans.
$138,500 for graduate or professional students—No more than $65,500 of this amount may be in subsidized loans. The graduate debt limit includes all federal loans received for undergraduate study.
Note: The maximum total loan limits include any Subsidized Federal Stafford Loans or Unsubsidized Federal Stafford Loans you may have received under the Federal Family Education Loan (FFEL) Program. As a result of legislation, no further loans are made under the FFEL Program as of July 1, 2010.
Graduate and professional students enrolled in certain health profession programs may receive additional unsubsidized Direct Loan amounts each academic year beyond those shown above. For these students, there is also an increased aggregate loan limit of $224,000 (maximum $65,500 subsidized).
What are the current interest rates?
Here are the interest rates for loans first disbursed between July 1, 2012, and June 30, 2013.
Direct Subsidized Loans
Direct Unsubsidized Loans
Got other questions about interest? These tips might help:
- Prior federal loans and financial aid history—If you already have federal student loans and would like to check the interest rate, servicer information, and other financial aid history, go to the National Student Loan Data System.
- Understanding interest rates and fees—Find out how interest is calculated.
- Information for military members—If you are a member of the military, you may be eligible for special interest benefits relating to your federal student loans.
Other than interest, is there a charge for this loan?
Yes, there is a 1.051 % loan fee on all Direct Subsidized Loans and Direct Unsubsidized Loans. The loan fee will be proportionately deducted from each loan disbursement.
What additional steps must I take to receive my loan?
If your financial aid package includes federal student loans, your school will tell you how to accept the loan.
If it is your first time receiving a Direct Loan, you will be required to
- complete entrance counseling, a tool to ensure you understand your obligation to repay the loan; and
- sign a Master Promissory Note (MPN), agreeing to the terms of the loan.
Contact the financial aid office at the school you are planning to attend for details regarding the process at your school.
How will I receive my loan?
The school will first apply your loan funds to your school account to pay for tuition, fees, room and board, and other school charges. If any additional loan funds remain, they will be returned to you. All loan funds must be used for your education expenses.
When do I have to pay back my loans?
When you receive your first Direct Loan, you will be contacted by your loan servicer (you repay your loan to the loan servicer). Your loan servicer will provide regular updates on the status of your Direct Loan, and any additional Direct Loans that you receive. After you graduate, leave school, or drop below half-time enrollment, you will have a six-month grace period before you are required to begin repayment. During this period, you'll receive repayment information from your loan servicer, and you'll be notified of your first payment due date. Payments are usually due monthly. Learn more about repaying your loan.
What types of loan repayment plans are available?
There are several repayment options available that are designed to meet the individual needs of borrowers. Your loan servicer can help you understand which repayment options are available to you. Generally, you’ll have 10 to 25 years to repay your loan, depending on the repayment plan that you choose. Learn more about your repayment options.
What if I have trouble repaying the loan?
If you are unable to make your scheduled loan payments, contact your loan servicer immediately. Your loan servicer can help you understand your options for keeping your loan in good standing. For example, you may wish to change your repayment plan to lower your monthly payment or request a deferment or forbearance that allows you to temporarily stop or lower the payments on your loan. Learn more about deferment or forbearance options.
Can my loan be canceled, forgiven, or discharged?
Yes. Before your loan money is disbursed, you may cancel all or part of your loan at any time by notifying your school. After your loan is disbursed, you may cancel all or part of the loan within certain time frames. Your promissory note and additional information you receive from your school will explain the procedures and time frames for canceling your loan.
Under certain conditions, you may have all or part of your loan canceled, discharged, or forgiven. Find out about loan cancellation, discharge, or forgiveness.
Students have the right to cancel a loan up to seven days after the loan has been credited to their student account. Click here for a loan cancellation form.