Subsidized and Unsubsidized Loans


Stafford Loan is one of the many types of federal student loans designed to offer financing to eligible students with financial need.

It is offered at a lower interest rate than the borrower would otherwise be able to get for a private loan.

There are, on the other hand, strict eligibility requirements and borrowing limits on Stafford Loans.

These loans can either be subsidized or unsubsidized. “Subsidized” means that the interest is paid by the government while the student is in school.

For “unsubsidized” loan, you are responsible for all of the interest accrued from the time the loan is disbursed until it is paid off in full. The interest may be deferred throughout enrollment and added to the loan principal upon graduation.


Am I Eligible?


Stafford loans are available to undergraduate, graduate, and professional students who meet the following conditions —

  • Submission of FAFSA or Free Application for Federal Student Aid
  • Demonstrate financial need (as determined by FAFSA) if you are applying for a “subsidized” loan
  • Be enrolled or plan to enroll at least half time in an eligible participating institution

How do I Apply?


Even though the “unsubsidized” loan is available to all students regardless of financial need, you must still submit the FAFSA to be eligible.

Your school will use the information from your FAFSA to determine how much “subsidized” and “unsubsidized” you are eligible to receive. If you’re eligible, you will receive an award letter with the instructions on how to accept the loan.

If it is your first time receiving, you must complete a Master Promissory Note (MPN) – a legal document in which you promise to repay your loan and any accrued interest and fees.


How much can I borrow?


There are limits on the amount in subsidized and unsubsidized loans that you may be eligible to receive each academic year and the total amounts that you may borrow for undergraduate and graduate study.

These limits vary depending on what year you are in school and whether you are a dependent or independent student. Graduate and professional students have higher loan limits than undergraduates.

Loan Limits Dependent Independent
First-Year (Freshman)
(Unsubsidized)
$5,500
($3,500)
$9,500
($3,500)
Second-Year (Sophomore)
(Unsubsidized)
$6,500
($4,500)
$10,500
($4,500)
Third-Year and Beyond (Junior, Senior)
(Unsubsidized)
$7,500
($5,500)
$12,500
($5,500)
Cumulative
(Unsubsidized)
$31,000
($23,000)
$57,500
($23,000)
Graduate /
Professional Students
$20,500
(unsubsidized only)1
Cumulative
(Unsubsidized)
$138,500
($65,500)

What are the current interest rates?


The interest rates for the current academic year are as follows: 4.66% for undergraduate loans (both subsidized and unsubsidized) and 6.21% for graduate loans. All interest rates are fixed for the duration of your loan.

LOAN TYPE BORROWER TYPE INTEREST RATE
Subsidized Loans Undergraduate 4.66%
Unsubsidized Loans Undergraduate 4.66%
Unsubsidized Loans Graduate or Professional 6.21%

Aside from the interest, keep in mind that you need to pay an origination fee of 1.073% based a percentage of the amount of loan you receive.


If you are a single mother hoping to resume your education, Stafford loan offers one of the best choices for borrowing to pay for college — unless, of course, if you’re eligible for Perkins Loan.

And you should always consider maximizing both “subsidized” and “unsubsidized” loan options before borrowing other loans that usually come with higher interest rates.


  1. Graduate/professional students no longer eligible for subsidized loans for loan periods beginning on or after July 1, 2012 []