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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What is a Subsidized Student Loan?

Subsidized student loans are for undergraduate students only. The government pays the interest while you are enrolled in school at least halftime, and during periods of eligible deferments. This type of loan is awarded based on demonstrated financial need, and there are both annual and cumulative limits you can borrow. Subsidized loans include Direct Subsidized (a.k.a. Stafford) Loans and Perkins Loans.

Note: no Perkins loans will be made or disbursed after June 30, 2018.

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What is an Unsubsidized Student 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. Unsubsidized loans include Direct Unsubsidized (a.k.a. Unsubsidized Stafford) Loans.

What is a PLUS loan?

PLUS loans are available to parents of undergraduate students, as well as graduate and professional students to help with costs not covered by other financial aid. The borrower’s credit history will be considered when applying for a PLUS loan. Borrowers are only able to borrow up to the school's cost of attendance, minus any other aid received. PLUS loans may be referred to as Parent PLUS Loans or Grad PLUS Loans.

The chart below will help you understand the similarities and differences among the three major types of federal education loans (subsidized, unsubsidized, and PLUS).

Federal Subsidized Loan Options (Stafford and Perkins) 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 Perkins 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, 2018)

5.05% fixed for Direct Subsidized Loan

5% fixed for Perkins Loan

5.05% fixed for undergraduate students

6.6% fixed for graduate students

7.6% 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
1.062%  Oct. 1, 2018 through Sept. 30, 2019 
4.248%  Oct. 1, 2018 through Sept. 30, 2019 
 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

   Perkins Loans    

 Dependent and Independent
Undergraduates: $5,500

Graduate and Professional
School Students: $8,000

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

9 months for Perkins Loan

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**


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.

Is There a Tax Benefit Offered for Having a Federal or Private Student Loan?

Good news! A borrower of student loans may be eligible to deduct up to $2,500 each year for interest paid on a student loan.  The loan must be a qualified education loan and used to pay for qualified higher education expenses, like tuition, fees, room and board.

Tax credits, also referred to as education tax benefits, can be claimed by students and families for a number of eligible expenses.

For more information, visit for advice on education tax benefits.

*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.