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What is the difference between a Direct Subsidized Loan and a Direct Unsubsidized Loan?

Direct Subsidized vs Direct Unsubsidized

The Direct Subsidized Loan is a need-based loan, and your qualification for this loan is determined by the information reported on your FAFSA along with your grade level and degree status. “Subsidized” means that the Dept. of Education will pay the interest on this loan for you as long as you are enrolled at least half-time and/or during eligible periods of deferment. “Unsubsidized” means that they are not paying the interest on the loan for you, and the loan will accrue (gather) interest at all times, including during half-time enrollment or deferment. Both types of loans still accrue interest during periods of forbearance. An easy mnemonic for remembering the difference is that “subsidized” starts with an “s,” so “someone else” is paying the interest; “unsubsidized” starts with a “u,” so “you” pay the interest.

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