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What is the difference between subsidized and unsubsidized Federal Direct Stafford Loan?

April 26, 2017difference Federal loan Stafford Subsidized Unsubsidized

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What is the difference between subsidized and unsubsidized Federal Direct Stafford Loan?

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A. Subsidized Stafford Loans are need-based and the interest is paid by the U.S. Department of Education while the student is in school, in the grace period, and in authorized deferment periods. Unsubsidized Stafford Loans are not need-based. The interest payment is always the borrower’s responsibility. A borrower can choose to pay interest that accrues while the borrower is in school, in grace, in deferment or other times when payments are not otherwise expected can be paid, or the unpaid accrued interest will be capitalized, i.e., added to the outstanding principal amount of the loan.