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One of the most important concepts affecting your student loan repayment plan is the difference between subsidized vs. unsubsidized loans. It is important when you’re seeking federal assistance or are in repayment to understand which you qualify for and what you should expect once you receive your loan.

Subsidized loan definition & info for students

The federal government offers subsidized loans based on the student’s financial need when applying for aid through the Free Application for Federal Student Aid (FAFSA). The key components of a subsidized student loan (and the biggest benefits) are:

  • The U.S. Department of Education pays for any interest accrued while you are in school. To receive this benefit, you must be enrolled at least halftime.
  • You’ll also get a six-month grace period after graduation, meaning that any interest that accrues during your college career and six months afterward, is completely paid for.

When the grace period ends, though, you are required to make monthly payments of principal and interest. Unfortunately, subsidized loans are only available to undergraduate students. You can also take advantage of this benefit if you choose to defer your student loans, however, if you wish to put your loans in forbearance interest will still accrue on a subsidized loan.

Unsubsidized student loans, on the other hand, begin accruing interest from the date of your first loan disbursement, though you’re not required to pay that interest until you finish school. When you graduate, the amount of money that accrued during your education is simply added to the principal loan amount and you begin paying off that new amount.

One benefit to taking out a federal unsubsidized loan is that you are not required to demonstrate financial need so the amount you can take out is much higher than a subsidized student loan. Additionally, unsubsidized federal student loans are available for both undergraduate and graduate students.

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Subsidized vs. unsubsidized loans: which is for you?

Federal subsidized and unsubsidized direct federal loans for undergraduates carry the same low, fixed interest rate, so it is generally a good idea to take out a subsidized loan before taking on additional debt with an unsubsidized loan.

If you are planning on going back to school, subsidized loans can help save a lot of money in deferment since interest will not accrue.

Private loans

If you do not have a choice because of your lack of financial need or because you are attending graduate school, your next option is to choose between a federal unsubsidized loan, a federal PLUS loan, or a private student loan.

Rates on all newly-issued federal loans are set to increase on July 1, 2017. Borrowers who are only eligible for federal PLUS loans or unsubsidized direct loans for graduate students may qualify for better rates from private lenders — particularly if they have a cosigner. Many private lenders now offer loans that are competitive with federal PLUS loans, which carry a 4.272 percent up-front disbursement fee that’s not charged by private lenders.

We’ve compiled our most trusted lending partners in the table below. Private loans could make sense for you – and with Credible you can cover 100% of your school-certified costs and finance almost any degree with one simple process. Compare rates from our vetted lenders and pick the option that fits you best:

LenderRatesLoan Term (years) 
citizens

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Fixed: 5.25%+¹
Variable: 3.80%+¹
5, 10, 15¹Get Rates
Loan products
• Undergraduate, graduate, and parent loans
• Fixed and variable interest rates

Loan amounts
• $1,000 up to $170,000

Eligibility
• Must be a U.S. citizen or permanent resident
• Must be enrolled at least half-time in a degree-granting program at an eligible institution
• International students can apply with a creditworthy U.S. citizen or permanent resident co-signer
collegeave

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Fixed: 5.31%+
Variable: 3.54%+
8, 10, 12, 15Get Rates
Loan products
• Undergraduate and graduate loans
• Fixed and variable interest rates

Loan amounts
• $2,000 up to 100% of your school-certified cost of attendance

Eligibility
• Available to all US residents that attended an eligible undergraduate or graduate school
• Students with little or no credit history will benefit from having a creditworthy co-signer
connext

View details
Fixed: 5.40%+
Variable: 3.91%+
10, 15Get Rates
Loan products
• Undergraduate and graduate loans
• Fixed and variable interest rates

Loan amounts
• Undergraduate: $2,000 up to $500,000
• Graduate: $2,000 up to $150,000, $200,000 for an MBA/Law Degree, and $250,000 for a Medical/Pharmacy Degree

Eligibility
• Must be a U.S. citizen or permanent resident
• Student must be admitted to or enrolled at least half-time at an eligible institution when applying
• must meet credit criteria, or add a cosigner who meets the cosigner requirements
discover

View details
Fixed: 6.49%+
Variable: 4.99%+
15, 20Get Rates
Loan products
• Undergraduate and graduate loans
• Fixed and variable rates

Loan amounts
• Up to 100% of your school-certified tuition, housing, books and more, up to aggregate loan limits

Eligibility
• Must be a U.S. citizen or permanent resident
• Must be enrolled at least half-time in a degree-granting program at an eligible institution
• Must be making satisfactory academic progress as defined by your school

More details about Discover student loans
ihelp

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Variable: 4.63%+20Get Rates
Loan products
• Undergraduate and graduate loans
• Variable rates only

Loan amounts
• Undergraduates: $1,000 ($3,000 for Georgia residents) up to $100,000
• Graduates: $1,000 ($3,000 for Georgia residents) up to $150,000

Eligibility
• Must be a U.S. citizen or permanent resident
• Borrower or cosigner must have at least 3 years of positive credit history and annual income of $18,000 or greater
• Must be enrolled at least half time in an iHELP eligible school
invested

View details
Fixed: 5.02%+
Variable: 2.98%+
5, 10, 15Get Rates
Loan products
• Undergraduate and graduate loans
• Fixed and variable rates

Loan amounts
• $1,001 up to 100% of your school-certified cost of attendance

Eligibility
• Only available to all Indiana residents and available to all US residents attending an eligible Indiana school
• vailable to all Indiana residents and available to all US residents attending an eligible Indiana school
raise

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Variable: 5.71%+5, 7, 10Get Rates
Loan products
• Undergraduate and graduate loans
• Variable rates only

Eligibility
• The raise^ private student loan program is available only to students with a permanent residence in Alabama, Arizona, Arkansas, California, Colorado, Florida, Georgia, Indiana, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Nebraska, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Ohio, South Carolina, Tennessee, Texas, Washington or West Virginia and cosigners in any state except Wisconsin
• Must be a U.S. citizen or permanent resident
• Must be earning income (or apply with a cosigner who is)
• Available to students enrolled at least half-time at an eligible institution


View details
Fixed: 5.74%+2
Variable: 3.87%+2
5-152Get Rates

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|raise^ Repayment Examples | 2Sallie Mae Disclosures

Learn more

Here are some articles with more detailed information on taking out and repaying federal direct subsidized and unsubsidized loans, PLUS loans, and private student loans.

Credible is a multi-lender marketplace that allows borrowers to get personalized rates and compare student loans from vetted lenders.

 

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