Borrowing for College? Start with Subsidized Student Loans | Credible

Our finish is to give you the tools and confidence you need to improve your finances. Although we receive recompense from our partner lenders, whom we will constantly identify, all opinions are our own. credible Operations, Inc. NMLS # 1681276, is referred to here as “ credible. ” College can be expensive. But thankfully, respective fund options are available — including complimentary care, like scholarships and grants, adenine well as student loans that you ’ ll have to repay in the future .
If you need to borrow for school, it ’ randomness normally best to rely on federal Direct Subsidized Loans first earlier turning to early types of union loans. This is chiefly because the government covers the sake on subsidized loans while you ’ re in educate, which can reduce your sum repayment costs .
If you’re wondering how to get a subsidized loan, here’s what you should know:

Start with Direct Subsidized Loans: Here’s Why

If you need to take out student loans, it ’ s a full theme to exhaust any Direct Subsidized Loans available to you before considering other types of federal and individual scholar loans — chiefly because these loans provide several benefits that can keep your costs low while in school a well as simplify your future repayment .
Some advantages include :

  • Subsidized interest: The government will cover any interest that accrues on a Direct Subsidized Loan while you’re in school at least half time, during your grace period, and during any deferment periods.
  • Fixed interest rates: All federal student loans — including subsidized loans — come with fixed interest rates. This means your rate will stay the same throughout the life of the loan, and your payment amount will only change if you sign up for a different repayment plan.
  • No credit check: Unlike private student loans, Direct Subsidized Loans don’t require a credit check. This means you can get a subsidized loan even if you have poor or no credit as long as you meet the other requirements.
  • Cosigner not required: Direct Subsidized Loans also don’t require a cosigner.
  • Grace period: Subsidized loans come with a six-month grace period that begins after you leave school or drop below half-time enrollment. During this time, you won’t have to make payments, and the government will pay any interest that accrues.
  • Flexible repayment options: Like other federal loans, Direct Subsidized Loans provide multiple repayment plan options in addition to the standard 10-year repayment plan. For example, you could sign up for an income-driven repayment (IDR) plan that bases your payments on your income. Or you might choose a graduated repayment plan that starts with lower payments that gradually increase over time — which could be helpful if you expect to earn more in the future.
  • Access to federal benefits: If you take out a subsidized loan, you’ll also have access to major federal benefits and protections — such as deferment and forbearance options.
  • Potential loan forgiveness: Several student loan forgiveness programs are available to federal loan borrowers. For example, if you work for a government or nonprofit organization and make qualifying payments for 10 years, you might be eligible for Public Service Loan Forgiveness.

Keep in mind: Direct Subsidized Loans are available only to undergraduate students with fiscal need. They besides come with borrowing limits — $ 3,500 to $ 5,500 per year ( $ 23,000 aggregate limit ), depending on your year in school. here ’ s how direct subsidize Loans compare to the other main types of federal student loans :

Loan type Who qualifies?
Interest rates
Loan limits
Direct Subsidized Loans Undergrad students with financial need 3.73%* $3,500 to $5,500 per year
Direct Unsubsidized Loans Undergrad, graduate, and professional students Undergrad: 3.73%*

Graduate and professional: 5.28%*

Dependent undergrad: $5,500 to $7,500 per year ($31,000 total limit)

Independent undergrad: $9,500 to $12,500 per school year ($57,500 total limit)

Graduate and professional: $20,500 per year
($138,500 total limit)

Direct PLUS Loans Parents, graduate students, and professional students 6.28%* Cost of attendance minus any other financial aid received
*Federal student loan rates for the 2021-22 academic school year.

Learn More: Hidden Costs of Federal Direct Unsubsidized Student Loans

Next, look to Direct Unsubsidized Loans

After you ’ ve exhausted any Direct Subsidized Loans that you ’ re eligible for, Direct Unsubsidized Loans are a commodity irregular choice. You might besides consider Direct PLUS Loans or secret student loans to fill any fiscal gaps left over .
here ’ s how these other loans work :

  • Direct Unsubsidized Loans are available to undergraduate, graduate, and professional students, regardless of financial need. Unlike with subsidized loans, you’re responsible for all the interest that accrues on unsubsidized loans.
  • Direct PLUS Loans come in two categories: Grad PLUS Loans for students who want to pay for grad school and Parent PLUS Loans for parents who want to cover their child’s education costs. PLUS Loans typically come with higher interest rates compared to Direct Subsidized and Unsubsidized Loans. They also require a credit check.
  • Private student loans can be a helpful option once you’ve exhausted your federal loan limits. Unlike with most federal loans, you’ll generally need good to excellent credit to qualify for a private student loan — a good credit score is usually considered to be 700 or higher. Also keep in mind that private student loans don’t come with federal benefits.

All federal scholar loans come with fixed rates that are set by Congress each class. here ’ s how federal lend sake rates have fluctuated over time :

Keep in mind: Unlike with federal student loan rates, individual lenders set private student loan rates according to market conditions. Your credit and the repayment term you choose will affect the rates you’re offered on private loans.
Unlike with federal student loan rates, person lenders set secret scholar loanword rates according to commercialize conditions. Your credit and the refund condition you choose will affect the rates you ’ re offered on individual loans. generally, borrowers who have good credit and who opt for shorter repayment terms receive the most friendly rates. Check Out: Federal Stafford Loans

How to qualify for need-based financial aid

Need-based fiscal aid is reserved for students with fiscal need. For exercise, you must have demonstrable fiscal necessitate to be eligible for Pell Grants or Direct Subsidized Loans .
To calculate your financial need, your school’s financial aid office will:

  1. Determine your cost of attendance. This is the estimate of how much you’ll pay in tuition, fees, room and board, books, supplies, and other eligible expenses.
  2. Determine your Expected Family Contribution (EFC). This is the amount of money your household can afford to pay toward your education. Your school calculates this number based on the information you provide in the Free Application for Federal Student Aid (FAFSA). Keep in mind that this isn’t how much your family will actually have to pay — it’s simply an index number your school uses to determine how much financial aid you qualify for.
  3. Subtract your EFC from your cost of attendance. This is how much you can receive in need-based aid.

For exemplar, if your cost of attendance is $ 16,000 and your EFC is $ 11,000, you ’ d be eligible for up to $ 5,000 in need-based aid. Keep in beware that scholar loanword limits will besides affect how much need-based care you can get. For model, while you might have substantial fiscal motivation, you can lone borrow up to an aggregate limit of $ 23,000 in Direct Subsidized Loans .
here are the scholar loan limits that you can expect for federal loans. note that these take into report both your total limits per school year equally well as how much you can get specifically in subsidize loans during your undergraduate studies if you have fiscal necessitate .

Year Dependent students Independent students
(or dependent students whose parents can’t obtain PLUS Loans)
First-year undergrad annual loan limit $5,500
($3,500 in subsidized loans)
($3,500 of in subsidized loans)
Second-year undergrad annual loan limit $6,500
($4,500 in subsidized loans)
($4,500 in subsidized loans)
Third-year and beyond undergrad annual loan limit $7,500
($5,500 in subsidized loans)
$12,500 ($5,500 in subsidized loans)
Graduate or professional students annual loan limit N/A $20,500
(unsubsidized only)
Subsidized and unsubsidized aggregate loan limit $31,000
($23,000 in subsidized loans)
Undergrad: $57,500 ($23,000 in subsidized loans)

Graduate or professional: $138,500* ($65,500 in subsidized loans)

*Note: Graduate aggregate limit includes all federal loans received for undergraduate study.

Direct Subsidized Loan eligibility

Your school will use the information you provide in the FAFSA to determine if you ’ re eligible for a Direct Subsidized Loan. To qualify, you must :

  • Be a U.S. citizen or an eligible noncitizen
  • Have a valid Social Security number
  • Be an undergraduate student with demonstrable financial need
  • Be enrolled at least half time at a school that participates in the federal student aid program
  • Be enrolled in an eligible degree or certificate program

Tip: Be sure to fill out the FAFSA before the deadline so you don’t miss out on any financial aid you’re entitled to — for the 2022-2023 academic year, you have until June 30, 2023.
Be sure to fill out the FAFSA before the deadline so you don ’ thyroxine miss out on any fiscal help you ’ re entitled to — for the 2022-2023 academic year, you have until June 30, 2023. besides keep in mind that some care is given on a first-come, first-served basis — so it ’ s a adept mind to submit the FAFSA arsenic early as possible, specially if you have high fiscal need. Learn More: How to Apply for Federal and Private Student Loans

How to get a subsidized loan

If you ’ re ready to apply for a Direct Subsidized Loan, follow these four steps :

  1. Fill out the FAFSA. Be prepared to provide your personal and financial information when completing the FAFSA — for example, your Social Security number and most recent tax return information. If you’re a dependent student, you’ll also have to provide one of your parent’s information. Your school will use your FAFSA results to determine what federal student loans — such as Direct Subsidized Loans — and other federal financial aid you’re eligible for.
  2. Apply for scholarships and grants. Unlike student loans, college scholarships and grants don’t have to be repaid — which makes them a great way to pay for college. There’s no limit to how many scholarships and grants you can get, so it’s a good idea to apply for as many as possible. You might also qualify for school-based scholarships depending on your FAFSA results.
  3. Take out federal student loans. After you submit the FAFSA, your school will send you a financial aid award letter detailing what federal student loans and other federal financial aid you’re eligible for. You can then decide which aid you’d like to accept.
  4. Use private student loans to fill any gaps. After you’ve exhausted your scholarship, grant, and federal student loan options, private student loans could help fill any financial gaps left over. Keep in mind that you’ll typically need good to excellent credit to qualify for a private student loan.

Tip: If you ’ ra struggling to get approved for a secret scholar loanword, consider applying with a cosigner who has full or excellent citation to improve your chances. tied if you don ’ t need a cosigner to qualify, having one could get you a lower matter to pace than you ’ five hundred get on your own. No matter what type of student loan you get, it ’ randomness significant to consider how much that loan will cost you. This way, you can be prepared for any add expenses .
You can find out how much you ’ ll owe over the life sentence of your federal or secret student loans using our scholar loan calculator below .
Enter your lend data to calculate how much you could pay
loan sum


Enter the total amount borrowed


sake rate


Enter your annual interest rate


loan term


Enter the amount of time you have to repay your loan


total Payment $

total Interest $

monthly Payment $

With a $ lend, you will pay $ monthly and a sum of $ in matter to over the life sentence of your loan. You will pay a sum of $ over the life of the lend, assuming you ‘re making full payments while in school .

How long does it take to get a subsidized student loan?

It can take anywhere from a few weeks to a few months to get a federal student lend. Once you submit the FAFSA, it should normally take about three weeks to receive your fiscal aid award letter. If you haven ’ thyroxine heard from your school after three weeks, it ’ s a dear idea to contact the fiscal help office .
note that schools typically disburse federal scholar loans once per condition — this could be once per semester, shipshape, or quarter, depending on your school. Your educate will use your federal funds to cover any tutelage or fees that you owe. Most schools will refund any remaining counterweight to you within a couple of weeks of receiving your lend funds .
Keep in mind: Some schools add a 30-day wait period before funds can be released to freshman undergraduate students. You can check with your school to see if they use this convention. Check Out: Independent vs. Dependent Student: Which Are You?

How are subsidized loans distributed?

Any federal scholar loans that you accept will be distributed directly to your school and will first be used to cover any tuition and fees that you owe. If there ’ s a remaining libra, it will be refunded to you to use for other department of education expenses .
Learn More: Federal vs. Private Student Loans: 5 Differences

Repayment of federal subsidized loans

After you leave school or dribble below half-time registration, your target Subsidized Loan will enter a six-month grace period. During this time, the government will cover any interest that accrues on the lend, and you won ’ thyroxine have to make payments .
Following this, your lend will start out on the standard 10-year refund plan. But several other refund options are besides available, which provide tractability a well as aid if you ’ rhenium struggling to make your payments. here are some refund plans to consider :

  • Income-driven repayment plan: On an IDR plan, your payments will be based on your income — typically 10% to 20% of your discretionary income. Additionally, you can have any remaining forgiven after 20 or 25 years, depending on the plan.
  • Graduated repayment plan: With this type of plan, your payments will start out lower and will increase every two years. This could be a helpful option if you expect to earn a higher income in the future.
  • Extended repayment plan: This plan lets you spread out your loan payments over 25 years, which could greatly reduce monthly payments. You can choose between a standard extended repayment plan with fixed monthly payments or a graduated extended repayment plan with payments that will gradually increase over time. Just keep in mind that you’ll pay more in interest over time with a longer repayment term.

If you ’ re having a hard time making your payments, other options include :

  • Deferment: This is a way to temporarily postpone your loan payments. Some scenarios that could make you eligible for deferment include undergoing cancer treatments, facing economic hardship, losing your job, or enrolling in an approved fellowship program. Note that with a Direct Subsidized Loan, you won’t have to pay interest that accrues during a deferment period.
  • Forbearance: This is another option for pausing your loan payments. Two types of forbearance are available for federal loans: mandatory forbearance that your servicer must grant in certain situations, and general (or discretionary) forbearance that’s granted on a case-by-case basis. Keep in mind that unlike with deferment, you’re responsible for all the interest that accrues during a forbearance period.
  • Loan forgiveness: If you meet certain requirements, you might be eligible for a federal student loan forgiveness program. Many of these programs are geared toward borrowers working in specific careers, such as doctors, lawyers, and teachers.

Check Out: Student Loan Deferment vs. Forbearance: How to Choose

Consider private loans to fill the gaps

After you ’ ve exhausted your scholarship, grant, and federal student loanword options, private student loans could help cover any remaining expenses. While these loans don ’ thymine come with union protections, they do offer some benefits of their own — for example, you can apply at any meter, and you might be able to borrow more than you ’ five hundred pay back with a federal loan .
If you decide to take out a private scholar loanword, be certain to consider as many lenders as potential to find the right lend for your needs. credible makes this easy — you can compare your prequalified rates from multiple lenders in two minutes .
Compare student loan rates from top lenders

  • Multiple lenders compete to get you the best rate
  • Get actual rates, not estimated ones
  • Finance almost any degree

See Your Rates
Checking rates will not affect your credit

Ariha Setalvad contributed to the reporting for this article.

About the author
Angela Brown Angela Brown
Angela Brown is a scholar lend, personal finance, and substantial estate authority and a contributor to Credible. Her work has appeared in Fox Business, LendingTree, FinanceBuzz, and Yahoo Finance .
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