Subsidized loan means it is based on your need and thus the government will pay your loan interest in school, during the 6 month’s grace period once you graduate or separate from school.
Unsubsidized loan is not based on the need aspect and thus the government begins charging you interest from the moment you receive money.
1. In case of subsidized loans the government will pay your interest during times when you’ve been authorized to defer the loan.
In case of unsubsidized loans Interest is not paid by the government while you’re in school, so you will be charged interest from the time the loan is dispersed to the time it’s paid in full
2. In case of subsidized loans it’s easy to keep the subsidized status if you remain enrolled in an approved program at least half time and there are no major changes to your family’s Expected Family Contribution (EFC)
In case of unsubsidized loans if you do not demonstrate financial need for the Subsidized loan, you may still borrow the same amounts under the unsubsidized loan.
3. In case of subsidized loans during the grace period you don’t have to pay any interest or principal
In case of unsubsidized loans you don’t have to pay the principal but you will be charged interest. You can either pay as you go or let it get capitalized by the lender later.
4. In case of subsidized loans it is important to note that subsidized loans do not provide complete freedom from paying interest. Once a student is no longer enrolled at least halftime in school, he or she becomes responsible for paying interest on the loan. Interest does not accrue, however, when the loan is in a grace period or deferment. This is one way in which subsidized and unsubsidized loans are alike. At some point, the borrower usually does pay interest.
In case of unsubsidized loans when an individual obtains an unsubsidized student loan, he or she may be able to avoid paying interest while enrolled in school by capitalizing it. In such cases, the capitalized interest simply adds on to principal amount that must be repaid. Once the student is out of school, he or she will have even more to repay because the new interest on the loan will be based on a combination of the loan principal and the interest that was capitalized during enrollment.
5. One of the most apparent differences between educational, subsidized and unsubsidized loans involves the demonstration of need. With subsidized loans, students must demonstrate that they have a certain level of need for financial aid. The opposite is true of unsubsidized loans. Unsubsidized loans are typically available to students without regard to their financial circumstances.
6. There are also subsidized and unsubsidized loans for housing. To be approved for a subsidized home loan, the borrower has to meet certain requirements, such as those related to income and place of residence. Subsidized loans are frequently a part of first-time buyer programs. They are typically designed to help those who would ordinarily have trouble purchasing a home. Unsubsidized home loans are generally not need or residency based.
For the benefit of the students there are Stafford unsubsidized student loan, federal Unsubsidized Stafford student loan, unsubsidized Stafford student loans. You can opt for any of these.