What is the Difference Between a Direct Subsidized Loan and a Direct Unsubsidized Loan?

Federal Direct Subsidized Loans are “need” based loans which have repayment deferred until after you graduate, withdraw, or enroll less than half-time. Interest is paid by the federal government until the end of the six-month grace period after you drop to less than half-time enrollment.

Federal Direct Unsubsidized Loans are “non-need” based loans which have repayment deferred until after you graduate, withdraw, or enroll less than half-time. The interest begins to accrue once the loan is disbursed and you pay all of the interest on the unsubsidized loan. You do have the option to pay the interest while you are in school and during the grace period. However, if you choose not to pay the interest, it will accumulate and be added back to the principal amount of your loan at the end of your grace period.