Subsidized vs. Unsubsidized Stafford Loans

by DeLadurantey Law Office, LLC on October 7, 2014

Signing student loanBefore you agree to take out a student loan, it is important to understand what “subsidized” and “unsubsidized” means. If possible, you want a subsidized student loan because the federal government is liable to pay the interest that accrues during periods of deferment. If your loan is unsubsidized, you remain liable to pay all of the accrued interest. As a result, having a subsidized loan can save you a large sum of money.

Deferment of a student loan occurs when you are attending school at least half-time. During this period, your obligations to make your loan payments are suspended. However, once you graduate or stop attending school at least half-time, your grace period ends. If your student loan is subsidized, the federal government has paid the interest that accrued while you were in school. If you have an unsubsidized loan and you have not been paying the interest as it accrued, the interest is likely capitalized. To learn more about capitalization, please read our blog titled What is Capitalization of Student Loans

The Federal Stafford Loan and the Federal Perkins Loan programs offer subsidized loans and your eligibility for these types of loans is based upon financial need. Unsubsidized student loans like those offered in the Federal Stafford Loan and the Federal PLUS Loan programs are not based upon your financial need.

The Stafford Loan website sets forth the annual limits for subsidized and unsubsidized Federal Stafford Loans as follows:

Overall Federal Stafford Loan Annual Limits

Year in School                       Dependent Student               Independent Student

Freshman                                             $5,500                                     $9,500

Sophomore                                          $6,500                                     $10,500

Junior                                                  $7,500                                     $12,500

Senior & Subsequent                          $7,500                                     $12,500



At DeLadurantey Law Office, LLC, we help businesses and families find their way out of highly difficult financial situations. We provide the advice and guidance you need in obtaining debt relief through bankruptcy and debt negotiations. We can also assist you in student loan law and defending a foreclosure action. Contact us at 414-377-0518 to discuss how our Milwaukee bankruptcy attorneys can assist you. Like us on Facebook.


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