Subsidized Loan
EducationGlossary term
Definition
A type of federal student loan available to undergraduate students with demonstrated financial need, where the government pays the interest while you are enrolled at least half-time, during your grace period, and during deferment. This makes subsidized loans one of the most affordable borrowing options for students because interest does not accrue during these periods. Eligibility and loan amounts are determined by your school based on your FAFSA results.
Related terms
- Unsubsidized LoanA type of federal student loan available to both undergraduate and graduate students regardless of financial need, where interest begins accruing as soon as the loan is disbursed. Unlike subsidized loans, you are responsible for all interest on unsubsidized loans, including while you are in school. If you do not pay the interest while enrolled, it capitalizes and is added to your principal balance, increasing the total amount you owe.
- FAFSAThe Free Application for Federal Student Aid is a form that students must complete each year to determine their eligibility for federal financial aid, including grants, loans, and work-study programs. The FAFSA collects information about your family's income, assets, and household size to calculate your Expected Family Contribution. Most colleges and states also use the FAFSA to award their own financial aid, making it a critical step in the college funding process.
- Federal Student LoanA loan funded by the federal government to help students pay for college or career school, offering fixed interest rates and flexible repayment options that are generally more favorable than private loans. Federal student loans include Direct Subsidized, Direct Unsubsidized, and Direct PLUS loans, each with different eligibility requirements and terms. Borrowers may also qualify for income-driven repayment plans and loan forgiveness programs.
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