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Subsidized vs. Unsubsidized Stafford Loans

unsubsidized stafford loan

A Guide to Choosing Your Federal Stafford Loan

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Stafford loans are low-interest loans that are offered by the government to help you pay for college. There are two types of federal Stafford Loans: Subsidized Stafford Loans and Unsubsidized Stafford Loans. Both types of loans offer fixed interest rates and allow up to 10 years to be paid back, but the Subsidized Stafford Loan has the best perks because it is offered to anyone who exhibits financial need.

The one you choose should be based upon your financial need, your eligibility requirements, and whether or not you would like your interest paid by the government while you are in school. To help you choose the best federal Stafford loan for you, we've created a comparison chart below:

If you need help finding the right student loan, we recommend starting your search with Student Loan Network


Eligibility
Subsidized Stafford Loan
Unsubsidized Stafford Loan
  • Be a U.S. citizen or an eligible non-citizen with a valid social security number
  • Be working toward a degree or certificate in an eligible program
  • Have a high school diploma, GED or pass an approved ability-to-benefit (ABT) test
  • Register with the Selective Service if you're a male between 18 and 25
  • Maintain good grades
  • Must not have a drug offense
  • Must not owe repayment on a federal grant
  • Be a U.S. citizen or an eligible non-citizen with a valid social security number
  • Be working toward a degree or certificate in an eligible program
  • Have a high school diploma, GED or pass an approved ability-to-benefit (ABT) test
  • Register with the Selective Service if you're a male between 18 and 25
  • Maintain good grades
  • Must not have a drug offense
  • Must not owe repayment on a federal grant
Pros
Subsidized Stafford Loan
Unsubsidized Stafford Loan
  • The government pays your interest as long as you are in school half-time (6 units for undergraduates and 4 units for graduates)
  • The government will pay your interest during times when you've been authorized to defer the loan
  • It's easy to keep the subsidized status if you remain enrolled in an approved program at least half time and there are no major changes to your family's Expected Family Contribution (EFC)
  • Offers a maximum of $23,000 to students upon graduation
  • No payments until 6 months after you cease to be a half-time student
  • You are allowed to defer any payments until after you graduate
  • If you do not demonstrate financial need for the Subsidized Stafford/Direct Loan, you may still borrow the same amounts under the Unsubsidized Stafford/Direct Loan
  • Offers a maximum of $23,000 to students upon graduation
Cons
Subsidized Stafford Loan
Unsubsidized Stafford Loan
  • Together, the loan amounts for Subsidized and Unsubsidized Stafford Loans cannot exceed certain annual limits
  • You can only borrow certain amounts based on your grade level in school and on the type of student you are (Not the most flexible deal if you compare student loan rates)
  • Loan fees (origination and insurance fees) are automatically deducted from each disbursement
  • Not awarded on the basis of need, so since anyone is eligible, you need to apply early
  • Interest is not paid by the government while you're in school, so you will be charged interest from the time the loan is dispersed to the time it's paid in full (This is not the best deal if you compare student loans that don't have to be paid until after you graduate)
  • You can only borrow certain amounts based on your grade level in school and on the type of student you are
  • Loan fees (origination and insurance fees) are automatically deducted from each disbursement
Repayment
Subsidized Stafford Loan
Unsubsidized Stafford Loan
  • No payments until 6 months after you cease to be a half-time student
  • During the grace period you don't have to pay any interest or principal
  • No payments until 6 months after you cease to be a half-time student
  • You don't have to pay the principal but you will be charged interest. You can either pay as you go or let it get capitalized by the lender later

Regardless of what type of Stafford Loan you choose, you will still get a low-interest rate, and that will benefit you long after you graduate. Stafford loans are the most widely accepted student loans by college students, but if you want to choose a different type of loan, you can look our Student Loan Comparison page.

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