Unsubsidized Loan
What Is an Unsubsidized Loan?
An unsubsidized loan is a federal student loan that is available to undergraduate and graduate students regardless of financial need. Unlike subsidized loans, interest begins accruing as soon as the loan funds are disbursed.
Borrowers are responsible for paying all interest on the loan.
Why It Matters
Unsubsidized loans provide access to additional funding for students who may not qualify for subsidized loans or who need more financial assistance.
However, because interest accrues during school and deferment periods, borrowers should understand how interest affects the total cost of the loan.
How Unsubsidized Loans Work
Students apply for unsubsidized loans by completing the FAFSA.
Loan eligibility does not depend on financial need, though borrowing limits apply.
Borrowers can choose to:
- pay interest while in school
- allow interest to accumulate and be added to the loan balance
Repayment begins after the grace period once the student leaves school.
Example
After receiving financial aid, Daniel accepts an unsubsidized federal loan to help cover housing expenses. Interest begins accruing immediately, though Daniel chooses to defer payments until after graduation.
Unsubsidized Loan vs Subsidized Loan
- Unsubsidized loans accrue interest immediately.
- Subsidized loans have interest covered by the government during qualifying periods.
FAQs About Unsubsidized Loans
Do students need financial need to qualify?
No, unsubsidized loans are available regardless of financial need.
When does interest begin accruing?
Interest starts accumulating when the loan is disbursed.
Can borrowers pay interest while in school?
Yes, borrowers may pay interest to reduce future loan costs.
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