Subsidized loan

Subsidized and unsubsidized loans are federal student loans for eligible students to help cover the cost of higher education at a four-year college or university, community college, or trade, career, or technical school. 

The U.S. Department of Education offers eligible students at participating schools Direct Subsidized Loans and Direct Unsubsidized Loans. (Some people refer to these loans as Stafford Loans or Direct Stafford Loans.

A subsidized loan is a loan on which the interest is reduced by an explicit or hidden subsidy. In the context of college loans in the United States, it refers to a loan on which no interest is accrued while a student remains enrolled in education.

In short, Direct Subsidized Loans have slightly better terms to help out students with financial need.

Here’s a quick overview of Direct Subsidized Loans:

• Direct Subsidized Loans are available to undergraduate students with financial need.
• Your school determines the amount you can borrow, and the amount may  exceed your financial need.
• The U.S. Department of Education pays the interest on a Direct Subsidized Loan
• while you’re in school at least half-time,
• for the first six months after you leave school (referred to as a grace period), and
• during a period of deferment (a postponement of loan payments).

*Note: If you received a Direct Subsidized Loan that was first disbursed between July 1, 2012, and July 1, 2014, you will be responsible for paying any interest that accrues during your  period. If you choose not to pay the interest that accrues during your grace period, the interest will be added to your principal balance