Subsidized vs. Unsubsidized Loans

Learn the differences between unsubsidized and subsidized student loans

There are many small but potentially crucial details you’ll need to pay attention to when sorting through various loan options and comparing financial aid award packages, one of which is the difference between Federal Direct subsidized and unsubsidized loans. The former generally refers to loan programs where the government pays the interest on the loan while the student is enrolled in school.

It's always a good idea to exhaust subsidized college loans - which can both lower the interest rate you and your child will pay and defer repayment of the loan - before filling the remaining expense gap with private loans.

Federal Direct Subsidized student loan details

A subsidized loan is one in which a borrower is not responsible for paying the interest while they’re still in school, or during a period in which they have earned a grace period or a deferment. Subsidized loans are awarded to those students that demonstrate a financial need, meaning not all students are eligible. Your eligibility for a Federal Direct Subsidized Stafford Loan is determined by your Free Application for Federal Student Aid (FAFSA) results and is awarded to you by the school’s financial aid office.

Federal Direct Unsubsidized student loan details

Unsubsidized loans apply interest to the loan amount from the start. Interest on unsubsidized loans begins accruing upon disbursement (or upon enrollment in school), and continues through the full life of the loan. Unsubsidized loans can include Federal Direct Unsubsidized Stafford Loans and Federal Direct PLUS Loans. To apply for these loans you must first complete the FASFA form.

All students are eligible for the Federal Direct Unsubsidized Stafford Loans. To apply for this loan you must first complete the FASFA form.

Learn more about affordable student loan options from Citizens Bank

You can find helpful information about financing your college education, with our TruFit Student Loan®, after you have maximized your federal options. If you are interested in additional student loan resources or have questions, call a student loan specialist at 1-800-708-6684, and we'll help walk you through the entire process of financing your child's education.