 TITLE: What’s the Difference Between Subsidized and Unsubsidized Student Loans? CONTENT: The key differences between subsidized and unsubsidized student loans include:\n### Interest Rates and Payments\nInterest rates on both types of student loans are set by the U.S. government and are fixed for the life of the loan. With subsidized student loans, the government pays the interest accrued on your loan as long as you are in school at least half-time (based on your school's definition). That means your loan balance stays the same while you're in school: If you borrow $10,000 at the beginning of the year, at the end of the year you still owe $10,000.\nWith unsubsidized loans, you are responsible for paying the interest on the loan right away—even while you're enrolled in school, even during any loan deferment period, and even during the six-month grace period after graduation before you have to start repaying the balance of the loan.\nWhat if you can't pay the accrued interest at that time? It may be hard to do on a student budget. If you don't pay the accrued interest, it gets added to the principal (a process called capitalization). Unfortunately, that means by the time your loan grace period is over after graduation, your loan balance could be significantly larger than the amount you originally borrowed. END