Subsidized vs. Unsubsidized Stafford Loans

RISK SignWhen you are researching student loans and trying to decide which one is the best for you, it is important to know the difference between subsidized and unsubsidized loans. A subsidized loan is more beneficial for borrowers because the federal government will pay the interest that accrues during periods of deferment. The borrower is liable to pay all of the accrued interest on unsubsidized loans. Thus, having a subsidized loan can save the borrower a significant amount of money.

When a loan is in deferment while the borrower is attending school (at least half-time), your obligation to repay it is suspended. Your payments of principal and interest are delayed until your grace period ends, which is typically after you graduate. If you have a subsidized loan, your interest has been paid by the government as it accrued. If you have an unsubsidized loan, your interest is capitalized if you have not been paying it as it accrued.

The Federal Stafford Loan and the Federal Perkins Loan programs offer subsidized loans. You must demonstrate financial need to be eligible for a subsidized loan. The Federal Stafford Loan and the Federal PLUS Loan programs have unsubsidized loans. Your eligibility to receive an unsubsidized loan is not based upon your financial need.

According to the Stafford Loan website, the amount of subsidized and unsubsidized Federal Stafford Loans cannot exceed the overall annual limits listed below:

Overall Federal Stafford Loan Annual Limits Year in School Dependent 

Year in School                       Dependent Student               Independent Student

Freshman                                             $5,500                                     $9,500

Sophomore                                          $6,500                                     $10,500

Junior                                                  $7,500                                     $12,500

Senior & Subsequent                          $7,500                                     $12,500


Please keep in mind that every matter is different. If you have questions about your student loan debt and you would like to schedule a no-cost consultation to discuss your options, please contact our office by completing the form on this website or calling us at (954) 932-5377.


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