What is a Subsidized Stafford Loan?

Subsidized Stafford loan

When going to college, one of the major aspects to worry about are the financial responsibilities. Many students need to get loans to go to college.

You may be asking what is a Subsidized Stafford Loan? This is a federal loan that you will borrow from the Direct Loans program. It is offered to undergraduate students with flexible payment options and a fixed interest rate. Subsidized loans do NOT accrue interest while you are in school enrolled as at least a part-time student.

College is a huge financial burden especially if you are going away to school or going out of state. If you are going away to school, you will need to pay for room and board on top of tuition and out of state tuition is higher than in-state tuition.

The first steps that you can take are to fill out FAFSA and to fill out as many scholarships as you can. It is best to fill out any scholarships that you even fill some of the requirements for because you never know how many people are actually applying for them and what the odds are that you could end up being the one chosen.

When it Comes to FAFSA, you can be Offered Loans or Grants

Loans consist of money that you will eventually have to pay back where grants are basically free money. A grant is sort of like a scholarship in a way it is just based on aid and not academics, athletics, etc.

If you are concerned with your finances for college or feel that you need some help understanding student loans, here is a little bit of information to ease your mind and help explain the best options when it comes to loans offered to you by FAFSA.

What is the Difference between Stafford Subsidized and Unsubsidized Loans?

You must be an undergraduate student who filled out FAFSA to be considered for either of these loans. The main difference when it comes to unsubsidized versus subsidized loans in the interest that is accrued.

  • Subsidized loans do NOT accrue interest while you are in school enrolled as at least a part-time student. This is great because accruing interest during your four years of school or more can make a huge difference in the overall amount that is due when you start paying.
  • An Unsubsidized loan is a loan that does accrue interest while you are in school. This basically means that you will start accruing interest on this loan as soon as the loan is sent to your accredited college or university.

Both are these loans are great opportunities for loans because they are better than most alternative student loans and have better benefits.

Do You Have to Pay Back the Stafford loan?

In short, the answer is yes. Anything that has the word “loan” at the end of it will have to be paid back. The only types of aid that won’t need to be paid back are scholarships and grants.

Scholarships or normally for reasons like academics, athletics, extracurriculars, religion, ethnicity, etc.

Grants are normally from colleges, universities, high schools, counties, government, etc. as a kind of gift “scholarship” per se that is not for academic reasons but normally solely based on financial need.

All loans are simply money that you will need to pay back eventually. The only difference between student loans and other loans are usually just the interest accruing or the amount of time you must pay it back.

Student loans are for people who are obviously not making very much money during the time they are at school. They are not the same type of loan that you would be getting for a car or something else when you are older or ready for those other types of commitments.

What is the Difference Between Stafford and Direct Loans?

The main difference is simply eligibility. Your loan amount is based on your financial need. The amount of money that your parents or caregivers make is really the biggest factor.

FAFSA also investigates any savings, stocks, etc. that you might have to gauge how much money you have for school. Unless you are dependent through the government, your type of loan is going to depend on financial need which depends on how much money your parents make and what their salaries are.

They also investigate whether your parents are together or not and how much money your sole caregiver makes (for instance if your parents are separated, they would only look at how much money the parent that you live with makes).

However, there really isn’t a difference between direct and Stafford loans because they are the same thing. The only difference would be between the direct Stafford unsubsidized loans and the direct Stafford subsidized loans which is what I explained earlier.

Direct Stafford loans are usually offered from FAFSA and given directly to your university. You may have to fill out excess forms or information through your accredited college or university to obtain them, but the forms are usually simple.

Check your college website or financial page to see what you need to do in order to receive them and accept them from FAFSA if you are interested in using them.

What Can you Use Stafford Loans For?

These types of loans can only be used for education-related expenses. These loans are only student loans and cannot be used for other things such as car payments and other expenses.

The loans will be sent directly to your school. These loans will most likely be shown on your financial statements for your college or university. If you aren’t sure where to find them you can always call your school advisor to the financial department.

Should you Accept Unsubsidized Loans?

If you are in need of a loan you should accept whatever you are able to get. If you have a better option from an alternative place that will also NOT accrue interest while you are in school then you should choose that option over a FAFSA unsubsidized loan.

It is, however, so common for students to need to accept these types of loans. It is obviously ideal to have only subsidized loans as a student, but when it comes down to it, you need this money in order to obtain your degree so you should accept what you need to help you get there.

If you are going to college and getting a degree, odds are that you are going to be making a decent amount of money. So even if you have to pay these loans off for a while after school, it will just be like another car payment except it will be a payment for your degree that helped you get to your career.

Is Stafford Loan the Same as FAFSA?

The Stafford loan can only be obtained through FAFSA. There are other things that you can get through FAFSA including grants, but you cannot get this loan unless you are an undergraduate student and you fill out FAFSA.

Another great thing about FAFSA is that simply filling out your FAFSA gives you financial information that you can put on scholarship applications. Many times scholarships will ask for your EFC which means expected family contribution. This will show how much the government assumes your family might be able to contribute to your finances for a college education per year.

This helps universities, the government, and scholarship committees figure out how much more help you may need to go to school and how dire your financial aid need is.

Is it Better to get Subsidized or Unsubsidized Loans?

As I had mentioned above, it is better to get a subsidized loan because in essence, you will be paying less in the end. You will not be accruing interest and therefore your overall bill will be smaller. However, when it comes down to it, you should take whatever loan you are able to get so that you can successfully pay for your college education.

 You can always investigate student loans at your bank and through your towns, cities, counties, etc. that may be offered and could have equivalent or better benefits as these loans. remembers you do not have to accept these loans if you have offered them.


Overall, college is a big decision that leads to a big financial burden. It is important to carefully look into and research all options when it comes to paying for college and what you can do to pay the bill. Make sure to fill out as many scholarships you can so that you can take out the least amount of loans as possible. Also investigate any grants that are offered by your town, city, county or college.

When it comes down to it so many students have to get student loans and it is just stepping stone to get you to your career. In the end, it will be like another car payment and it will feel totally worth it. If you have any questions calling FAFSA or your future university is always a good idea as well. Your high school counselor may also be an option to talk to about different decisions regarding finances.

To learn more about FAFSA check out this post on what affects FAFSA grants and loans.

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