Q:

What's the difference in subsidized and unsubsidized student loans?

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Quick Answer

The difference in subsidized and unsubsidized student loans is that the U.S. Department of Education pays the interest on subsidized student loans while the student attends school and under certain other conditions, while the student is responsible for interest on unsubsidized student loans, notes Federal Student Aid. Students can choose to allow the interest on unsubsidized loans to accrue while attending school.

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Full Answer

With subsidized student loans, the U.S. Department of Education pays the interest on the loan as long as the student attends school half time or more, notes Federal Student Aid. The government also pays the interest on subsidized loans for the first 6 months after the student leaves school and during any periods of student loan deferment. An exception to this is that students receiving subsidized loans disbursed from July 1, 2012 through July 1, 2014 must pay the interest during the six months grace period after leaving school.

With unsubsidized student loans, if the student opts not to pay the interest on the loan while still attending school or during the 6-month grace period after leaving school or during any forbearance periods, the interest accrues. The interest also capitalizes, which means that it is added onto the total of the loan.

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