Education
What is Subsidized Loan?
Definition
A Direct Subsidized Loan is a federal undergraduate loan awarded on need. The U.S. Department of Education pays the interest while the student is enrolled at least half-time, during the six-month grace period, and during deferment.
Real-World Example
A dependent freshman borrows the maximum $3,500 subsidized loan. Interest does not accrue while she is in school, saving roughly $650 versus an unsubsidized loan over four years.
Why It Matters
Subsidized loans are the cheapest federal borrowing option for undergraduates. Exhausting subsidized capacity before touching unsubsidized or private loans is a fundamental student-finance rule.
Frequently Asked Questions
Are subsidized loans available to graduate students?
No — since 2012 they have been restricted to undergraduates with demonstrated need.