When a student in the U.S. applies for college financial aid, the student and his or her parents should know how to compare subsidized and unsubsidized student loans in order to make an informed decision on what sort of financial aid to select. The biggest difference between the two is how much you are allowed to borrow each year, but there are other factors, too, that can play into your loan choice.
EditComparing Loan Offers
- Fill out the Free Application for Federal Student Aid (FAFSA) form to determine how much financial aid you qualify for. Most students log onto the website http://www.fafsa.ed.gov/ to fill out the forms, but you may be able to acquire hard copies from your school guidance staff or a college you are applying to.
- The FAFSA form will ask for tax information, but don’t wait until you file your tax returns to submit the form. Estimates can be provided until you have the actual numbers. Try to send in the form the January before you start college.
- Find out your “Expected Family Contribution” (EFC). This is the amount of money that the government expects you and your family to contribute toward the costs of your education each year. The remainder of the amount due will be covered by college scholarships and loans. Most families cannot afford the entire amount of the EFC to pay for college and will supplement with unsubsidized loans.
- Determine your total costs for college. This includes not only tuition and fees but also room and board (unless you will live with parents, relatives, or friends for free), textbooks, supplies, laboratory fees and transportation costs.
EditAnalyzing and Choosing a Loan
- Compare your student-loan offers by repayment schedule. As a student you may not have the time or energy to hold a job while you are in college in order to start paying back loans, so knowing which loan lets you defer all payments while you are in school can be helpful.
- With a subsidized student loan, interest is not charged until you graduate. Interest is considered deferred and is subsidized by the federal government. You start paying the principal amount and the interest after you graduate. With an unsubsidized student loan the interest is charged from the time that the funds are first disbursed to you.
- Both types of loan will allow you to defer your principal and interest payments until after you graduate. However, an unsubsidized loan will accrue interest beginning from disbursement of funds.
- Compare your loan options by how much you can borrow. The amount that you need to borrow may influence which loan you choose. The cost differences at various colleges may weigh into your decision.
- Subsidized loans carry a specific cap on how much you can borrow. Unsubsidized loans also have a cap, but it is typically about $4,000 more per year than with subsidized loans. 
- Review the differences in loan requirements between unsubsidized and subsidized student loans. Your personal financial circumstances may not permit you to qualify for a subsidized loan.
- Subsidized loans are offered according to financial status and specific need. Each college determines how much money their students qualify for in unsubsidized or subsidized loans. Many students use subsidized-loan money first and then piggyback it with an unsubsidized loan.
- Compare loan similarities and differences. Unsubsidized and subsidized student loans both give you ten years to pay them back. Depending on your circumstances, there are other programs that allow you to make payments for 20 or 25 years. They both feature fixed interest rates.
- Unsubsidized loans start charging interest from the moment the money is given to you. However, sometimes the lender will give you the option of making “interest-only” payments while you are still in school. You might also make arrangements to postpone paying the interest and the principal until you leave school and the repayment period starts. 
EditFinding Other Options
- Research other loan options. If your unsubsidized and subsidized loan offers do not meet your financial needs, you do have other possibilities. These include private student loans from a bank or credit union, state aid programs, a home-equity loan attached to your parents’ home, or a Parent Loan for Undergraduate Students (PLUS) loan where financial institutions lend subsidized money to parents to cover the education expenses of a dependent child.
- Graduate students are eligible only for unsubsidized federal and Graduate PLUS loans. If you want to go to graduate or medical school, a subsidized loan will not be an option for you.
- Apply for a federal Perkins loan. This loan is made available through schools and is funded by the federal government for low-income students. Interest is not charged while you are enrolled in a post-secondary school at least half-time. You do not have to start paying it back until nine months after you graduate or when your enrollment is less than half-time. 
- Contact the financial aid office of your college. Ask that their financial-aid offer be increased by explaining, for example, that your financial situation has changed, such as the loss of a parent’s job. Also inform them of any higher financial-aid offers from other colleges, and ask if they will match it.
- If you have an unsubsidized loan, you can make interest payments while you are in school if you choose to. This will cut down on the total interest you’ll pay, but just know that any accrued interest will be added to your principal payment. This will raise your interest rate when you leave school, since the rate is based on the balance of principal.
- You also must be a U.S. citizen or eligible resident non-citizen.
- On a subsidized loan program you have to be in school at least half-time to meet the requirement for deferred interest.
- It can be difficult to discharge federal student loans even in bankruptcy. Borrow only what you need.