What are these loans used for?
What: Both Subsidized and unsubsidized loans are used to cover costs associated for higher education such as Undergraduate School and Graduate School.
Costs can Include
Tuition & Fees, fees can include things such as registration, and deposit fees
Housing Costs (Dorms)
Living Expenses
Books
Travel Expenses
Meal Plans
What is a Subsidized loan?
What: A Subsidized loan is money loaned out by the government for the purpose of covering college tuition & costs.
Info
Interest is NOT charged on these loans WHILE your still in school. The government pays the interest for you that is added during that time.
Within 6 months of graduating college, you must pay the government back, if you don't they will start charging you a low interest rate on your balance, and will build up from then.
Example: Subsidized Loans are like buying something now with no tax, and paying back later with no tax, as long you pay on time.
Max Amount you can borrow as of July 2025: $31,000 for undergrad dependents, $57,500 for undergrad independents.
More info here
What is an Unsubsidized Loan?
What: A Unsubsidized Loan is money loaned out by the government for the same purpose of covering college tuition and costs.
Info
Interest IS charged as soon as you borrow money to pay for expenses in college.
Interest MUST be paid back during college, or later on in your life.
Unpaid interest is added to your loan balance, and goes on to accumulate more interest.
Example: Basically like Compound Interest working against you.
Well... Which one is better??
Lets compare by looking at the pros and Cons of each Loan.
No added interest while you're in school
6 month grace period before interest is charged
Lower cost overall- due to no compounding interest
Fixed Interest Rate- interest rate is given, and dosen't change so nothing suprising
Is usually only available to undergraduate students
Amount you can borrow is limited
Half-Time Enrollment in college is needed for this loan, if not interest starts being added
Have to reapply through FAFSA each year
Unsubsidized Loans Pros & Cons
Available to both Undergraduate, and Graduate Students
Able to borrow more money
Fixed Interest Rate
Interest starts building as soon as you borrow
More Expensive than Subsidized Loans
No government support to pay off building interest
So which one is better?
It depends on the person, but usually subsidized loans are considered better as it's cheaper, and more lenient in payments, but factors like
Amount you need to borrow
Availability
Can play a factor in deciding if one or the other is better.
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