MBA Finances

Federal Loans FAQ's

What is the difference between Subsidized and Unsubsidized Loans?

"Subsidized" means that the federal government pays the interest on a borrower's loan, while the student is enrolled at least half-time (6 units) and during grace periods and deferments. Students must demonstrate financial need to qualify for subsidized loans.

"Unsubsidized" means that the federal government does not pay the interest on the loan (at any time). Interest is charged on the loan from the date on which it is disbursed until the loan is paid in full. The interest may be paid while the borrower is in school, or the borrower can let the interest accrue (simple interest---the interest is not capitalized during periods of at least half-time enrollment, or deferment). If the borrower chooses to let the interest accrue during periods of enrollment, then any outstanding interest at the time the borrower enters repayment (after the grace period ends) will be capitalized and added back to the principle amount borrowed.

The Grad PLUS Loan is another type of unsubsidized loan.