Direct Loan - Subsidized Or Not?

Direct Loan subsidized vehicles are federally backed student loans that are offered without interest charges attached during a set period of time. This type of loan can be particularly beneficial for keeping the costs of higher education low, especially when compared to Direct Loan unsubsidized options.
Understanding Subsidized Direct Loans 
Subsidized Direct Loan are offered to students who meet certain requirements. When this type of loan is in effect, interest will not be accrued on the outstanding principal when:

  • A student is still in school at least half-time;
  • A six-month post-graduation period is in effect;
  • During periods of authorized deferment.
Understanding Unsubsidized Direct Loans

Unlike subsidized Direct Loans, unsubsidized loans will accrue interest during the entire life of the loan. This means even when a loan is not in repayment status interest will capitalize on the outstanding principal. To help students keep Direct Loans affordable, it is feasible for them to begin repaying interest and even principal immediately.


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