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When you’re a student, you’re probably looking for ways to help pay for your education. There are many options out there, but two of the most popular are: subsidized and unsubsidized student loans.
Subsidized student loans are offered by the government and require no interest while you’re in school. The government pays the interest, which allows you to focus on your studies instead of worrying about how much money you owe.
Unsubsidized student loans, on the other hand, do require interest payments while you’re in school. This means that if your loan doesn’t cover all of your expenses at once, or if you don’t get enough financial aid to cover those expenses, then you’ll have to pay back some or all of the interest while still in school.
Subsidized and Unsubsidized Loans
Subsidized Loans are loans for undergraduate students with financial need, as determined by your cost of attendance minus expected family contribution and other financial aid (such as grants or scholarships). Subsidized Loans do not accrue interest while you are in school at least half-time or during deferment periods.
Unsubsidized Loans are loans for both undergraduate and graduate students that are not based on financial need. Eligibility is determined by your cost of attendance minus other financial aid (such as grants or scholarships). Interest is charged during in-school, deferment, and grace periods. Unlike a subsidized loan, you are responsible for the interest from the time the unsubsidized loan is disbursed until it’s paid in full. You can choose to pay the interest or allow it to accrue (accumulate) and be capitalized (that is, added to the principal amount of your loan). Capitalizing the interest will increase the amount you have to repay.
| Loan Type | Borrower | Interest Rate (for loans disbursed from 7/1/22 to 7/1/23) | Interest Rate (for loans disbursed from 7/1/21 to 7/1/22) | Origination Fee (for loans disbursed from 10/1/20 to 10/1/22) |
|---|---|---|---|---|
| Subsidized | Student | 4.99% Fixed for undergraduates | 3.73% Fixed for undergraduates | 1.057% |
| Unsubsidized | Student | 4.99% Fixed for undergraduates | 3.73% Fixed for undergraduates | 1.057% |
| Unsubsidized | Grad Student | 6.54% Fixed for graduates | 5.28% Fixed for graduates | 1.057% |
| PLUS | Parent PLUS | 7.54% Fixed | 6.28% Fixed | 4.228% |
| PLUS | Grad PLUS | 7.54% Fixed | 6.28% Fixed | 4.228% |
| Requirement | |
|---|---|
| Deferment | You may receive a deferment if you are enrolled in school at least half-time or for unemployment or economic hardship |
| Repayment | There is a 6 month grace period that starts the day after you graduate, leave school, or drop below half-time enrollment. You do not have to begin making payments until your grace period ends. |
More information regarding student loans, program requirements, and managing repayment can be found at https://studentaid.govStudentAid.gov.
How Much Can I Borrow?
The maximum amount you can borrow each academic year depends on your grade level and dependency status. See the chart below for annual and aggregate (lifetime) borrowing limits. You may not be eligible to borrow the full annual loan amount because of your expected family contribution or the amount of other financial aid you are receiving. To see examples of how your Subsidized or Unsubsidized award amount will be determined. Direct loan eligibility and loan request amount must be greater than $200 for a loan to be processed.
If you are a first-time borrower on or after July 1, 2013, there is a limit on the maximum period of time (measured in academic years) that you can receive Direct Subsidized Loans. This time limit does not apply to Direct Unsubsidized Loans or Direct PLUS Loans. If this limit applies to you, you may not receive Direct Subsidized Loans for more than 150 percent of the published length of your program. See your financial aid adviser or https://studentaid.gov/StudentAid.govhttps://studentaid.ed.gov/types/loans/subsidized-unsubsidized#eligibility-time-limit for more information.
Subsidized and Unsubsidized Loan Examples
Example 1:
Alberta Gator is a first year dependent undergraduate student. Her cost of attendance for Fall and Spring terms is $17,600. Alberta’s expected family contribution (EFC) is $10,000 and her other financial aid (such as grants, scholarships and work study) totals $9,000.
Because Alberta’s EFC and other financial Aid exceed her Cost of Attendance, she is not eligible for need-based, Subsidized Loans. She is, however, eligible for an Unsubsidized Loan. The amount she would be awarded would be $5,500. Even though her cost of attendance minus other financial aid is $8,600, she can only receive up to her annual loan maximum (which is $5,500 for a first year dependent undergraduate).
Subsidized and Unsubsidized Loan Limits
The amount you can borrow through the Federal Direct Loan Program is determined by your dependency status and classification in college. The annual and aggregate loan limits are listed in the charts below.
| Undergraduate Annual Loan Limits | Dependent Student | Independent Student |
|---|---|---|
| First Year | $5,500 (Up to $3,500 Sub) | $9,500 (Up to $3,500 Sub) |
| Second Year | $6,500 (Up to $4,500 Sub) | $10,500 (Up to $4,500 Sub) |
| Third, Fourth, and Fifth Year | $7,500 (Up to $5,500 Sub) | $12,500 (Up to $5,500 Sub) |
| Undergraduate Aggregate Loan Limits | $31,000 (Up to $23,000 Sub) | $57,500 (Up to $23,000 Sub) |
| Graduate Annual Loan Limits | Unsubsidized* |
|---|---|
| Graduate | $20,500 |
| Graduate Aggregate Loan Limits | $138,500 (Up to $65,500 Sub) |
| Pharmacy* (Graduate) Annual Loan Limits | $33,000 |
| Health Professions* Annual Loan Limits | $40,500 |
| Health Professions* Aggregate Loan Limits | $224,000 (Up to $65,500 Sub) |
* Some professional students may be eligible for increased unsubsidized loan limits. Contact your adviser to determine if you are eligible.
To Apply for a Subsidized and Unsubsidized Loan:
- Complete a FAFSA (Free Application for Federal Student Aid) at https://studentaid.gov/h/apply-for-aid/fafsastudentaid.gov.
To be Eligible You Must:
- be a U.S. citizen, national or permanent resident;
- be enrolled at least half-time;
- not have defaulted or owe a refund to any previous aid program; and
- maintain satisfactory academic progress.
To Receive Your Subsidized or Unsubsidized Loan:
- Visit ONE.UF at http://one.uf.eduhttp://one.uf.edu and select “Login with Gatorlink.” Login with your Gatorlink username and password. In the new window that appears, scroll to the “Financial Aid” section and select the correct award year under “View Your Summary.”
- Scroll to Federal Direct Subsidized or Unsubsidized Loans in your aid summary at ONE.UF. Accept, reduce or decline the loan using the “Take Action” button next to the loan. Students should only borrow what they need.
- Complete Entrance Counseling using http://StudentAid.govhttp://StudentAid.govStudentAid.gov.
- Complete a Master Promissory Note (MPN) using http://StudentAid.govhttp://StudentAid.govStudentAid.gov.
Top 3 Questions and Answers About Subsidized vs. Unsubsidized Loans from Reddit
If you’re applying for student loans for the first time, you may be confused about the difference between subsidized and unsubsidized loans. This article details common questions from reddit about the differences between the two.
If you’re applying for student loans for the first time, you may be confused about the difference between subsidized and unsubsidized loans. There’s major differences between the two, and understanding these differences can help you save thousands of dollars. We’ve compiled a list of questions and answers from subsidized vs unsubsidized student loans reddit threads. All posts and comments are written by real people with real student loan experiences. Read on to understand what subsidized and unsubsidized loans are, how they differ, and when to repay them.
1. What is the difference between subsidized and unsubsidized student loans?
If you qualify for both subsidized and unsubsidized student loans, you may be confused about what some of the major differences are. Subsidized and unsubsidized student loans are both options provided by the federal government, but they have different eligibility criteria, interest accumulation policies, and more. In this subsidized vs unsubsidized student loans reddit comment thread, users outlined and explained what some of these key differences actually are.
The top upvoted comment, from reddit user kouhoutek, reads “A subsidized loan is where someone else, usually the government, is paying the interest for a while. In the case of a student loan, it means you don’t accumulate interest on the money you borrowed. You borrow $50K, you owe $50K when you graduate. With an unsubsidized student loan, you usually don’t have to make payments while you are a student, but interest still accumulates and compounds. So that same $50K, you might owe $60K by the time you graduate. So obviously you want a subsidized loan. However, they are need based, which means your parent’s income often gets figured into it, and harder to get.”
For subsidized loans, the government will pay the interest on the loan from when you start school to 6-months after you graduate. This 6-month period is the grace period for your loan. After it ends, you’re responsible for paying the interest that accumulates on your loan.
Read more about the major differences between subsidized and unsubsidized loans here.
2. Which loan should I apply to first?
When you need money for college, deciding on which loans to apply to can be a tough process. When it comes to federal subsidized and unsubsidized loans, reddit users agree that subsidized loans should come first. Then, you should apply for unsubsidized loans if you need more money. This is because, as mentioned before, the interest that accumulates on subsidized loans while you’re in school and 6-months post graduation is paid for by the federal government.
In this reddit comment thread, user girl_of_squirrels provided how they believe you should go about applying for loans: “Generally the order you want to go in is to use grants/scholarships first, then federal subsidized loans, then federal unsubsidized loans, then Parent PLUS loans, then private loans.”
Other reddit users agree with this order, often ranking all federal options over private options. However, we here at Juno still think you should consider your private options. Definitely apply for Federal Stafford loans (subsidized and unsubsidized), but if you need more money after reaching the federal lending limit, don’t immediately turn to Parent PLUS loans — especially if you have good credit. Parent PLUS loans have a high interest rate and origination fee. For Parent PLUS loans disbursed after July 1, 2021 and before July 1, 2022, this interest rate is 6.284%. Some private loans, including our negotiated deal, have much lower starting rates and no fees.
If you want to compare Parent PLUS loans to your private options, we have a calculator that allows you to do so. You can also read more about Parent PLUS loans here.
3. Which loan should I repay first?
If you’ve taken out both subsidized and unsubsidized student loans and are currently working to repay them, you may be wondering which loan should take priority. The fastest way to pay them back is to pay off all your loans simultaneously, but that often isn’t a feasible option for people.
This reddit comment thread easily breaks it down. For people with subsidized loans who are still in school or are less than 6-months out post-graduation, the government will continue to pay your interest. As reddit user redditbobby puts it in this subsidized vs unsubsidized reddit thread, “Subsidized means that someone is paying your interest. Likely the government. Which means you’ll want to pay the unsubsidized first, since you’re paying your own interest there.”
However, if you are not in school and are no longer in the 6-month grace period post-graduation, many reddit users recommend that you start by paying off your loan with the highest interest rate. This allows you to avoid paying higher total interest costs over the lifetime of your loan.
It’s important to remember that subsidized and unsubsidized student loans are both forms of financial aid. They’re just structured differently, and they have different requirements. But they are both designed to help students pay for their education.
Subsidized loans are given out by the federal government and don’t accrue interest until after you graduate or drop below half-time enrollment. This means you’ll pay less for your education up front, which can make it easier to manage your budget—especially if you’re a new graduate who’s still trying to get started in the workforce.
Unsubsidized loans, on the other hand, accrue interest as soon as they’re disbursed, so you’ll need to be prepared for that cost when it comes due.
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