Which to Borrow: Subsidized vs. Unsubsidized Student Loans

Anyone can borrow unsubsidized federal loans, but those who qualify for the subsidized version save more money in interest.
Anna HelhoskiAug 5, 2021

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When choosing a federal student loan to , the type of loan you take out — either subsidized or unsubsidized — will affect how much you owe after graduation. If you qualify, you’ll save more money in interest with subsidized loans.


Both subsidized and unsubsidized loans are distributed as part of the federal direct loan program. However, if you meet the financial need requirements to qualify for subsidized loans, you’ll pay less over time than you would with unsubsidized loans.


That’s because while your subsidized loan for undergraduate study will carry the same interest rate as an unsubsidized loan, interest won’t accrue while you’re still in college and during other periods of nonpayment. For this reason, it’s best to exhaust any subsidized loans you’re offered before taking out unsubsidized loans.

Here are the main differences between subsidized and unsubsidized student loans:

To get a federal loan, first submit the . You’ll get a report detailing how much federal aid you’re entitled to. Be sure to first take all the grants and scholarships you’re offered in the report, since it’s free money. You’ll also want to accept any work-study you’re offered before you take on loans. Each year you’re enrolled, your school will determine the amount you can borrow as well as the loan types you qualify for: subsidized or unsubsidized.


Taking on too much student loan debt may make repayment difficult after you graduate. It’s best to borrow no more than you expect to earn in your first year out of college.

Borrow federal loans first: Private student loans often carry higher interest rates and require a co-signer if a student borrower has no credit history. Both unsubsidized and subsidized federal loans also offer more borrower repayment plans and forgiveness options than private loans.

 only if you still need to fill a payment gap to meet college costs. Compare all private loan options, including their interest rates as well as repayment and forbearance options, before you borrow.

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