Difference Between Unsubsidized and Subsidized Loans

Unsubsidized and subsidized loans may pertain to student loans or housing schemes meant for people of varying income groups. Unsubsidized loans are standard loans applicable to any and sundry. Subsidized loans are applicable only for those who are financially challenged or meet specific criteria.


The first noteworthy difference between unsubsidized and subsidized loans is that the former is available for everyone while the latter is only available for those who are eligible. Let us assume a particular loan amount ‘x’ to be available for people with family income of ‘y’ or less. Any student whose family income exceed ‘y’ would not be eligible for subsidized loan. He or she would have to apply for an unsubsidized loan. The purpose of subsidized loans is to help financially challenged families to fund the higher education needs of their kids.

Applicable to Citizens

Both unsubsidized and subsidized loans are applicable to citizens who are applying for a degree or course that is eligible for student loans and must not have any history of drug related offenses. There are many other similarities in application and approval processes. But the repayment is substantially different. At the outset, subsidized loans have lower rates of interest. Also, the repayment terms can vary.

Essentially, repaying the loan is made easier in a subsidized loan. The government, which could be the federal or the state government, may even pay the interest for a period of time when the student is studying. The student also has the advantage of consolidating the loan at the time of repayment. Subsidized loans are also available to parents of students who are from a financially challenged background.


It may appear that subsidized loans have all the advantages but it is not so in reality. Unsubsidized loans can be of any amount that is deemed feasible given the degree and the financial capacity of the family or guarantors of the student. Also, the degree, course and university may determine the loan amount. With subsidized loans, the amount that one can apply for is significantly less. Subsidized loans are mostly available for undergraduate programs. Once a graduate and applying for postgraduate programs, there aren’t many subsidized loans, whereas there are many unsubsidized loans for the same.

The loan deferral system of subsidized loans is the biggest advantage whereas the choice of amount is the biggest advantage with unsubsidized loans.

Leave a Comment