Home College Loans Federal Student Loans Comparing Subsidized, Unsubsidized and PLUS Loans

Comparing Subsidized, Unsubsidized and PLUS Loans

There are a variety of loan options available to help students and their families pay for college. However, these financing tools often have different interest rates, loan limits, eligibility criteria and other terms and conditions. And yes, the names of the various loans and programs can get confusing. You may hear terminology like Stafford, Direct, subsidized, unsubsidized, PLUS, and private loans, and wonder what the differences are between all of these options.

So what are all of these loan types and which one is right for you? Let’s start with the basic definitions of the different borrowing options.

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Subsidized Student Loan

The most common version of a subsidized loan is a Federal Direct Stafford Loan. And you may see this specific loan under many other names on your financial aid offers, or while talking to friends and family. You may hear it referred to as a Stafford Loan, Federal Subsidized Loan, Federal Sub Loan, or just a sub loan.

Direct Stafford loans are for undergraduate students only. The government pays the interest while you are in school and during periods of authorized deferment. This type of loan is awarded if you demonstrate financial need at your college, and there are both annual and cumulative limits you can borrow.

Additionally, there could be loans with an interest subsidy offered by your state or school as part of their financial aid offer.

compare student loan interest rates 2019

Unsubsidized Student Loan

Unsubisidized loans are the most common type of student loan. These loans accrue interest as soon as they are disbursed and it is your responsibility (the borrower) to repay the interest as it accrues, unless you choose to defer it and face a higher payment later. There are a few common types of unsubsidized loans you may see.

Direct Unsubsidized Loan

The Federal Direct Unsubsidized Loan is also part of the Federal Direct Stafford loan program. And just like the Direct Subsidized Loan, you may see it with many different names or abbreviations, like, Stafford Unsub Loan, Federal Unsubsidized loan, Federal Unsub Loan, or just unsub loan. Unsubsidized student loans can be used by undergraduate and graduate students.

You do not have to demonstrate financial need to qualify for an unsubsidized loan, but there are both annual and cumulative limits on how much you may borrow. This loan does not have an interest subsidy where the government pays your interest while you’re in school (are enrolled at least half-time enrollment) and during period of authorized deferment.

Federal PLUS Loan

This loan is federal student loan known as the Federal PLUS loan. It is available to parents of dependent undergraduate students (Parent PLUS Loan), as well as graduate and professional students (Grad PLUS Loan). It is used to help with costs not covered by other financial aid. The borrower’s credit history will be evaluated to ensure there is no adverse credit (as defined by the U.S. Department of Education) when applying for a PLUS loan.

There is no aggregate loan limit, however the total amount cannot be more than the student’s cost of attendance as determined by their school, minus all other financial aid received. PLUS loans are known to have higher interest rates and origination (e.g. loan) fees than other types of federal student loans.

private student loans for parents

Private Student Loans

Private student loans offer an option to students (and parents) who are in the need of additional funds to help with costs not covered by other financial aid. Private student loans are obtained through private banking institutions, like banks and credit unions, and will require the borrower to meet their credit requirements.

Just like a Federal PLUS loan, a borrower can’t borrow more than the student’s cost of attendance as determined by their school, minus other financial aid received. These loans are known to offer competitive interest rates and low-to-no loan fees for qualified borrowers. Private student loans are generally an option after you have exhausted all other financial aid offers.

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Federal Student Loan Options: How They Compare

Federal Direct Stafford Loan Federal Direct Unsubsidized Loan Federal PLUS Loan*+
 Credit-based? No No Yes
Who is the borrower? Undergraduate Student Undergraduate or
Graduate Student
Parent or Graduate / Professional
School Student
Based on demonstrated
financial need? 
Yes No No
Who pays the interest
while in school at least halftime?
Federal Government Borrower Borrower
Program names

Federal Direct Subsidized Loan
(also known as Federal Direct
Subsidized Stafford Loan)

Federal Direct Unsubsidized Loan
(also known as Federal Direct
Unsubsidized Stafford Loan)

Federal Parent PLUS Loan

Federal Grad PLUS Loan

Interest rates
(as of July 1, 2019)

4.53% fixed for Direct Subsidized Loan

4.53% fixed for undergraduate students

6.08% fixed for graduate students

7.08% fixed for parents and graduate/professional students
Loan fees for Direct Student Loans Federal Direct Subsidized Loan: 1.062%  Oct. 1, 2018 through Sept 30, 2019
1.059%  Oct. 1, 2019 through Sept. 30, 2020 
4.236%  Oct. 1, 2019 through Sept. 30, 2020
 Annual loan limits


 Stafford Loans 

Annual cost of attendance (COA)
minus other aid received during
the enrollment period.
  Dependent Undergraduates:  Dependent Undergraduates:   
  First Year Total Subsidized and Unsubsidized Stafford: $5,500 (no more than $3,500 can be Subsidized)

Second Year Subsidized and Unsubsidized Stafford: $6,500 (no more than $4,500 can be Subsidized)

Third Year and Above Subsidized and Unsubsidized Stafford: $7,500 (no more than $5,500 can be subsidized)
 Freshmen, sophomores, juniors, seniors
and any additional undergraduate
years of study: $2,000 
  Independent Undergraduates:   Independent Undergraduates:  
  First Year Total Subsidized and Unsubsidized Stafford: $9,500 (no more than $3,500 can be Subsidized)

Second Year Subsidized and Unsubsidized Stafford: $10,500 (no more than $4,500 can be Subsidized)

Third Year and Above Subsidized and Unsubsidized Stafford: $12,500 (no more than $5,500 can be subsidized)

Freshmen and sophomores: $6,000
Juniors, seniors and any additional
undergraduate years of
study: $7,000 per year

Graduate / Professional
School Students: $20,500

Medical School Students: $40,500

Aggregate (cumulative)
loan limits
Stafford Loans N/A
  Dependent and Independent
Undergraduates: $31,000 (no more than $23,000 can be Subsidized)

Independent Undergraduates $57,500 (no more than $23,000 can be Subsidized)

Graduate/Professional School Students: $65,500
Unsubsidized only

Graduate / Professional School Students: $138,500 (includes undergraduate and graduate totals)

Medical and Health Professional Students: $224,000 (includes undergraduate and graduate totals)

 Grace period

6 months for Direct Subsidized Loans

6 months for Direct Unsubsidized Loans None, however a deferment can be requested while in-school; deferment will continue for 6 months after student drops below half-time enrollment
 Can be used to pay
  • Tuition and fees
  • Room and board
  • Books
  • Supplies
  • Equipment
  • Transportation 
  • Miscellaneous / personal expenses**

View Loan Options

Federal Student Loan Repayment Plans

Student loan borrowers can choose from a variety of repayment plans when it's time to start paying back their loans.

Repayment plans that are not based on income are: Repayment Loans that are based on income include:

***Federal Parent PLUS borrowers are ineligible for these repayment plans. 

Private Loan Repayment Plans

Repayment plans for private student loans will vary by lender. Some lenders offer the option of a) deferred repayment while in school; b) interest-only payments while in school; or c) a low, fixed monthly payment while in school. Often, with the second or third option there may be interest rate reductions (as incentives) that apply. Beyond the in-school period, many lenders also allow you to choose how long you need to take to repay your loan(s). This can range anywhere from 8 years to 15 years, without the need for consolidation. But, keep in mind that private loan refinancing is also an option at a future point should you need to explore that.

Note that while lenders may refer to their repayment plans as standard repayment, extended repayment and graduated repayment, these repayment plans do not necessarily have the same terms and conditions and federal benefits as the repayment plans for federal education loans, despite the use of similar names for the repayment plans. Lenders may allow borrowers who are experiencing financial difficulty to switch repayment plans, or there may also be some limited forbearance options available in the event of a hardship.

As with any consumer transaction, it’s important to learn as much as possible about a loan before deciding to borrow with a specific lender – including the federal government. In short, know your rights and responsibilities and what your loan obligations might be! Always remember that the best loan is the lowest cost loan. See more advice on how to choose the best education loan.

*By definition, Federal PLUS loans are a type of unsubsidized loan. This program is distinguished here to emphasize how the Federal PLUS Loan differs from the Federal Direct Unsubsidized Loan.
**There are restrictions on personal expenses that may be paid with these funds.
***Federal Parent PLUS borrowers are ineligible for these repayment plans
+Both the Federal Parent PLUS and Federal Grad PLUS Loans are credit-based, similar to private education loans. Many consumers like to compare terms and conditions of different credit options. While there is a more lenient underwriting standard for the Federal Parent and Grad PLUS loan programs, hence making it easier to qualify for than private education loans, in many cases the interest rates on private loans are often times lower than the rates on the PLUS loans. Here are some similarities and differences:

-Eligibility for the Federal PLUS loan is not reliant upon income or a debt-to-income ratio, whereas private loans usually consider these factors.
-The federal loan program does take into account adverse history (such as 90-days or more past due on $2,085 or more total debt, bankruptcy, tax liens, foreclosure, etc.). This is similar to the private loan program but some lenders may be even more restrictive (i.e. may not approve loans with 30- or 60-day late reports).
-The fees for Federal PLUS loans are currently much higher (4.248%) than private loan offerings, which are typically 0% in the current marketplace.

It is these types of subtleties including length of repayment, total interest paid over the life of the loan, loan forgiveness, discharge and cancellation provisions, as well as repayment options which prospective borrowers should carefully review before deciding on an education loan.

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