 TITLE: What Is a Subsidized Loan? CONTENT: Subsidized vs. Unsubsidized Loans\n---------------------------------\nBoth subsidized and unsubsidized loans are offered through the federal government, but there are some key differences between them.\n*   Subsidized loans are only available to undergraduate students, while unsubsidized loans are open to undergraduates, graduates and those seeking professional degrees.\n*   Subsidized loans require students to demonstrate financial need, while unsubsidized loans do not. Because subsidized loans are intended for students who need greater financial assistance, they come with additional financial perks.\n*   With subsidized loans, the federal government pays (or \"subsidizes\") interest that accrues while the student is enrolled in school at least half time, during the six-month grace period after the student leaves school and during loan deferment.\nUnsubsidized loans, on the other hand, begin accruing interest immediately. Interest that is not paid before the grace period or loan deferment period ends will be capitalized (added to the principal loan amount) and will then accrue additional interest. Private loans also begin to accrue interest immediately.\nThese two loans do have some things in common, though. Neither require a credit check, and the interest rate is the same on subsidized and unsubsidized loans for undergraduate students (unsubsidized loans have a higher interest rate for graduate or professional students). END