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Home College Loans Federal Student Loans Comparing Subsidized vs Unsubsidized Loans

Comparing Subsidized vs. Unsubsidized Student Loans

We know this is could be one of the most confusing parts of your financial aid offer letter. The Federal Direct Stafford Loan program has two types of loans, Direct Subsidized Loans and Direct Unsubsidized Loans. They are similar, but there are some key differences.

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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 Subsidized 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.

Current federal and private student loan interest rates 2020

Unsubsidized Student 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 made available to  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.

 
 
  • Interest Rates
    • Fixed as low as: 4.25% APR1
    • Variable as low as: 1.25% APR1
  • Interest Rates
    • Fixed as low as: 3.49% APR1
    • Variable as low as: 1.09% APR1
  • Interest Rates
    • Fixed: 4.24% APR - 12.99% APR3
    • Variable: 1.24% APR - 11.99% APR3

Instantly Compare Private Student Loan Lenders

Federal Student Loan Options: How They Compare

Federal Student Loans Comparison
   Federal Direct Subsidized Loan Federal Direct Unsubsidized Loan
Who can borrow? Undergraduate Student Undergraduate or Graduate Student
Based on demonstrated financial need?  Yes No
Who pays the interest while in school at least half-time?  Federal Government  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)
Interest rates as of July 1, 2020  2.75% fixed for Direct Subsidized Loan

2.75% fixed for undergraduate students

4.30% fixed for graduate students

Loan fees for Direct Student Loans  1.057% Oct. 1, 2020 through Sept. 30, 2021

  1.057% Oct. 1, 2020 through Sept. 30, 2021 for undergraduate students

1.057% Oct. 1, 2020 through Sept. 30, 2021 for graduate students

Grace Period  six months six months
Can be used to pay for college related expenses such as
  • Tuition and fees
  • Room and board
  • Books
  • Supplies
  • Equipment
  • Transportation
  • Tuition and fees
  • Room and board
  • Books
  • Supplies
  • Equipment
  • Transportation

Annual Loan Limits

Direct Stafford Loan Limits
  Dependent Undergraduate Independent Undergraduate
First Year Limits Total Subsidized and Unsubsidized Stafford: $5,500 (no more than $3,500 can be Subsidized) Total Subsidized and Unsubsidized Stafford: $9,500 (no more than $3,500 can be Subsidized)
Second Year Limits Total Subsidized and Unsubsidized Stafford: $6,500 (no more than $4,500 can be Subsidized) Total Second Year Subsidized and Unsubsidized Stafford: $10,500 (no more than $4,500 can be Subsidized)
Third Year and Above Limits Total Subsidized and Unsubsidized Stafford: $7,500 (no more than $5,500 can be subsidized) Total Subsidized and Unsubsidized Stafford: $12,500 (no more than $5,500 can be subsidized)
Graduate Annual Limits
Graduate and Professional School Students  Medical School Students
 $20,500 Unsubsidized Loan $40,500 Unsubsidized Loan
Aggregate (Cumulative) Loan Limits
Direct Stafford Loan Undergraduate Direct Stafford Loan Graduate
Dependent: $31,000 (no more than $23,000 can be Subsidized) Graduate and Professional School Students: $138,500 (includes undergraduate and graduate totals)
Independent Undergraduates $57,500 (no more than $23,000 can be Subsidized) Medical and Health Professional Students: $224,000 (includes undergraduate and graduate totals)

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 

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.

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