The Federal Direct Subsidized Loan is generally more favorable for undergraduate students with demonstrated financial need due to the interest subsidy. The Federal Direct Unsubsidized Loan is a viable option for students who do not qualify for subsidized loans or need to borrow more, especially graduate students, but interest accrues during deferment.
| Attribute | Federal Direct Subsidized Loan | Federal Direct Unsubsidized Loan |
|---|---|---|
| Interest Rate (Fixed or Variable) | Fixed. For loans disbursed between July 1, 2024, and June 30, 2025, the interest rate is 6.53% for undergraduate students. For loans disbursed between July 1, 2025, and June 30, 2026, the interest rate is 6.39% for undergraduate students. | Fixed. For loans disbursed between July 1, 2024, and June 30, 2025, the interest rate is 6.53% for undergraduate students and 8.08% for graduate or professional students. These rates are fixed for the life of the loan. |
| Loan Amount Limits (Annual and Aggregate) | Annual limits vary depending on the year in school and dependency status. Dependent undergraduates can borrow up to $3,500 in their first year, $4,500 in their second year, and $5,500 in their third year and beyond. Independent undergraduates have higher annual limits. For dependent undergraduate students, the aggregate limit is $31,000, with a maximum of $23,000 in subsidized loans. For independent undergraduate students, the aggregate limit is $57,500, with a maximum of $23,000 in subsidized loans. | Annual Limits: For undergraduate students, the annual limit ranges from $5,500 to $12,500 depending on the year in school and dependency status. Graduate students can borrow up to $20,500 per year. Aggregate Limits: The aggregate loan limit for dependent undergraduate students is $31,000. Independent undergraduates can borrow up to $57,500. Graduate or professional students have an aggregate limit of $138,500, including any loans from undergraduate study. |
| Eligibility Requirements (Income, Enrollment Status) | Must be an undergraduate student with demonstrated financial need. Must be a U.S. citizen, national, or permanent resident. Must be enrolled at least half-time in a degree or certificate program at a participating institution. Must have a valid Social Security Number. Must maintain satisfactory academic progress. Must not be in default on any existing federal student loans or owe a refund to any previous aid program. Must have received a high school diploma or equivalent (e.g., GED). Must meet general eligibility requirements for federal student aid. Must first have received a determination of Pell Grant eligibility if attending a school that participates in the Pell Grant Program. | Enrolled at least half-time in a degree or certificate program at a school participating in the Direct Loan Program. U.S. Citizen or eligible non-citizen. No requirement to demonstrate financial need. Not be in default on previous federal direct loans. |
| Repayment Options (Standard, Income-Driven, Graduated) | Standard Repayment Plan: Fixed monthly payments over a 10-year term. Graduated Repayment Plan: Payments start lower and increase every two years, with a repayment term of up to 10 years (or up to 30 years for consolidation loans). Extended Repayment Plan: Fixed or graduated payments over an extended term (up to 25 years). Income-Driven Repayment (IDR) Plans: Payments are based on income and family size. Examples include Income-Based Repayment (IBR), Income-Contingent Repayment (ICR), Pay As You Earn (PAYE), and Saving on a Valuable Education (SAVE). | Borrowers have access to various flexible repayment plans, including income-driven repayment options. A standard repayment term is 10 years. |
| Deferment and Forbearance Options | Deferment: Allows you to postpone loan payments under certain circumstances, such as being enrolled in school at least half-time, unemployment, or economic hardship. Forbearance: Allows you to temporarily postpone or reduce loan payments if you're experiencing financial difficulties. | If you are unable to make your scheduled loan payments, contact your loan servicer immediately to understand your options for keeping your loan in good standing. Options include changing your repayment plan or requesting a deferment or forbearance. During deferment, interest will continue to accrue. |
| Loan Forgiveness Programs (Eligibility and Requirements) | Public Service Loan Forgiveness (PSLF): Available to borrowers who work full-time in a qualifying public service or non-profit job and make 120 qualifying payments. Income-Driven Repayment (IDR) Forgiveness: After 20 or 25 years of qualifying payments under an IDR plan, the remaining loan balance may be forgiven. | Consolidation of a Direct Unsubsidized Loan simplifies the repayment process and provides access to loan forgiveness programs. |
| Grace Period Length | Six-month grace period after graduating, leaving school, or dropping below half-time enrollment before repayment begins. | Six months after graduating, leaving school, or dropping below half-time enrollment. |
| Fees (Origination, Late Payment) | Origination Fee: A percentage of the loan amount that is deducted from each loan disbursement. For loans disbursed on or after October 1, 2020, the origination fee is 1.057%. Late Payment Fees: The U.S. Department of Education does not charge late fees on federally-held student loans. However, private student loan companies may charge late fees. | Origination Fee: For loans disbursed on or after October 1, 2020, the loan fee is 1.057% of the loan amount. This fee is deducted from each loan disbursement. Late Payment Fee: Not specified in the provided context. |
| Credit Score Requirements | Federal direct loans do not require a credit check. | No credit score is required for Direct Unsubsidized Loans. |
| Cosigner Requirements | Federal direct loans do not require a cosigner. | A cosigner is not required for Direct Unsubsidized Loans. |
| Disbursement Schedule | Loan fees are deducted from each disbursement. Before the loan money is disbursed, you can cancel all or part of the loan by notifying your school. | Loan disbursements typically begin three business days before the start of each term. The total loan amount is evenly distributed across the semesters or trimesters included in your loan request. |
| Impact on Credit Score | Taking out a student loan can potentially increase your credit score by diversifying your credit mix. Making on-time payments can help build a positive credit history. Missed payments can negatively impact your credit score and can remain on your credit report for up to seven years. Defaulting on a student loan can significantly decrease your credit score. | All student loans are considered in credit scores once reported to credit bureaus. It's important to stay current with student loan payments to avoid late payments or default, which can negatively impact your credit rating. |