Authorized under Title IV of the Higher Education Act of 1965, eligible students can receive low-interest, federal student loans through the U.S. Department of Education to help pay for higher education. These loans can be subsidized or unsubsidized to help pay for career school or college at participating schools. To get started, you need to complete a Free Application for Federal Student Aid, or FAFSA.
What They Have in Common
For both types of loan programs, your school will determine how much you can borrow, and you must be either enrolled at least part-time in a participating school or accepted for enrollment. You must be enrolled in a degree program or other program that leads to a certificate.
Where They Differ
Subsidized and unsubsidized student loans differ in who can apply, financial need, how long you can receive them, who pays the interest and when. The terms will change if you change schools or change the length of your degree program.
Subsidized Student Loans
Only undergraduates can apply for subsidized student loans. These are based on financial need, and you will have to show that you meet the criteria. There is a limit on the maximum time you can receive subsidized loans, but not for unsubsidized loans.
While you are in school at least half time, for the first six months after you leave school and during periods of deferment or postponing payments, the U.S. Department of Education pays the interest on your loans. It is not capitalized. Interest that accumulates during your grace period after leaving school will be added to the principal balance on loans first received between July 1, 2012, and July 1, 2014.
Unsubsidized Student Loans
Undergraduate and graduate students can apply for unsubsidized loans, and you do not have to show any financial need. You are responsible for paying the interest while enrolled, after you leave school and during any deferment periods. If you do not pay the interest during any period, it will accrue and can be capitalized.
About Participating Schools
Participating schools may be four year colleges or universities, community colleges, technical schools, trade schools or career schools. However, if you are eligible for one of these loan programs, you must attend a participating school to receive benefit. Ask if they participate in the Direct Loan Program before you enroll so you can make a more informed choice about where you enroll.
Federal financial student aid is available only for U.S. citizens and eligible non-citizens, but you may be able to receive financial aid for study abroad if you meet the aid criteria. View specific eligibility criteria online at the Department of Education’s Student Aid page.
Mandatory Entrance and Exit Counseling
Before you enroll and after you leave school, these sessions will explain your responsibilities and rights as a student borrower, and your loan repayment responsibilities and terms, respectively.
Subsidized student loans have better terms than unsubsidized student loans. They require proof of financial need and are available only to undergraduate students. Undergraduate and graduate students can apply for unsubsidized student loans without having to prove financial need. Criteria and terms for either one are time-sensitive and can change when you change your enrollment. Both offer low-interest rates to help you reach your higher education goals.