What Is an Unsubsidized Loan?


  • An unsubsidized loan is a federal student loan available to all undergraduate or graduate students regardless of financial need.
  • Students are responsible for the interest that accrues on their unsubsidized student loans during all periods.
  • Like subsidized loans, unsubsidized loans are eligible for many federal benefits, such as Income-Driven Repayment (IDR).

Need to take out student loans to help cover the cost of college? If so, federal student loans are a good place to start. The Department of Education offers two main types of federal student loans to eligible schools: Direct Subsidized and Direct Unsubsidized loans. 

Both types of student loans are eligible for key federal benefits like Income-Driven Repayment and federal forbearance and deferment. And both qualify for federal forgiveness programs like Public Service Loan Forgiveness (PSLF) and Teacher Loan Forgiveness.

But while they bear many similarities, there are a few key differences between subsidized and unsubsidized loans. Let’s take a closer look at unsubsidized loans to see what sets them apart.

What is an unsubsidized loan?

An unsubsidized loan is a federal student loan that’s available to all students who are enrolled at least half-time in an eligible school. The main difference between unsubsidized and subsidized loans is that unsubsidized loans are accessible to a large number of students.

Unlike subsidized loans, students do not need to demonstrate financial need to qualify for an unsubsidized loan. And Direct Unsubsidized loans are the only type of Direct Stafford loan that can be used to help cover the cost of a graduate or professional program.

But if accessibility is the biggest benefit of unsubsidized loans, their biggest disadvantage is that students are responsible to pay the interest that accrues on them during all periods. With subsidized loans, on the other hand, the government will cover your interest charges while you’re still in school and during your six-month grace period.

What are the interest rates and fees for an unsubsidized loan?

For undergraduate students, the interest rate on unsubsidized (and subsidized) loans will be 4.99% for the 2022-2023 school year. But for graduate students, the interest rate increases to 6.54%. 

All students must pay a 1.057% loan fee each time they take out a new unsubsidized student loan. The loan fee is deducted from your loan disbursement, which means that your total amount borrowed will be higher than the actual money you received during school.

How much can you borrow in unsubsidized loans?

Another benefit of unsubsidized student loans is that they have much higher annual and aggregate loan limits than their subsidized loan counterparts. 

For example, first-year independent students can borrow no more than $3,500 in subsidized loans, but they can borrow up to $9,500 in unsubsidized loans. Here’s a quick breakdown of the yearly and aggregate loan limits for unsubsidized student loans:

unsubsidized loans



Clint Proctor


Your school will ultimately determine how much you can borrow in unsubsidized student loans by comparing their cost of attendance to any additional financial aid that may be available to you.

When does repayment begin on unsubsidized loans?

Like subsidized loans, you’re not required to make payments on your unsubsidized student loans while you’re still enrolled at least half-time in school. And you’ll also have a six-month grace period after you leave school before you must begin repayment.

However, it’s important to understand that interest on unsubsidized loans will continue to accrue even during periods of non-payment. And if you don’t pay those interest charges, they will be added to your principal once repayment begins (this is called capitalization). 

To avoid this, you could elect to pay only the interest on your unsubsidized loans while you’re in school. Talk to your loan servicer about how to set up interest-only payments while you’re in school if this is something that you’re interested in.

How do you apply for an unsubsidized loan?

There is no specific application for Direct Unsubsidized loans. Instead, the school that you’re planning to attend will typically include them in your financial aid package if you have a funding gap.

To qualify for Direct Unsubsidized loans in your financial aid package, you’ll need to fill out and submit the Free Application for Federal Student Aid (FAFSA) form. Your school will use your FAFSA information to decide how much student aid you’re entitled to receive. 



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