What Is an Unsubsidized Student Loan?

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ByChristopher Boston
Edited byCasie McCoskey
ByChristopher Boston
Edited byCasie McCoskey

Updated: January 10, 2024

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Planning and paying for college is a significant step toward your future. It often involves navigating various federal student aid options to find the right fit for your educational needs and financial situation. Among these options are unsubsidized loans, a type of financial aid that helps cover higher education costs.

Unlike subsidized loans, interest on unsubsidized loans starts accruing immediately with loan disbursement. This means you'll be responsible for the interest while in school and after graduation, so it's helpful to understand how they work as you plan your college and future finances.

Overview of Unsubsidized Student Loans

An unsubsidized loan is a type of federal student aid available to both undergraduate and graduate students. You don't need to demonstrate financial need to qualify, making it a common choice for many. These loans help cover the cost of higher education, including tuition, books and living expenses. While they offer the flexibility of allowing you to fund your education, remember that interest accrues from the time of loan disbursal.

Your school determines eligibility for unsubsidized loans based on your cost of attendance minus any other financial aid you might receive, like grants or scholarships. This means the amount you can borrow might vary depending on your situation. To apply, you must be enrolled at least half-time in an eligible program and complete the Free Application for Federal Student Aid (FAFSA).

Keep in mind that you're responsible for the interest on your unsubsidized loan at all times, whether in school or during grace periods. If you choose not to pay the interest while studying, it will accumulate and increase the total amount you owe over time. Understanding and planning for these responsibilities will help you manage your unsubsidized loan effectively.

Unsubsidized Loans vs. Subsidized Loans

Both unsubsidized and subsidized loans are types of federal aid designed to help students finance their education. While they serve a similar purpose, there are distinct differences between them.

Unsubsidized loans are available to undergraduate and graduate students and do not require demonstrating financial need. The key factor is that you're responsible for all the interest that accrues from the moment you receive the loan funds, even while in school and during grace periods. If you choose not to pay the interest as it accumulates, it will be added to the total amount you owe.

In contrast, subsidized loans are only for undergraduate students who demonstrate financial need. The U.S. Department of Education pays the interest on these loans while you're in an in-school, grace or deferment period. This benefit can significantly reduce the amount you owe over time.

Unsubsidized Loans
Subsidized Loans


Undergraduate and graduate students

Undergraduates with financial need

Interest Responsibility

The student is responsible at all times

The government pays during specific periods

Interest Accumulation

Interest accumulates immediately

No interest while in school, grace or deferment periods

Loan Limits

Higher limits compared to subsidized loans

Lower limits due to financial need-based criteria

By considering these unique aspects, students can better gauge which loan type aligns more closely with their financial circumstances and educational goals.

Pros and Cons of Unsubsidized Loans

Before starting an application for an unsubsidized loan, weigh the pros and cons to make an informed decision that aligns with your financial situation and future goals. By carefully considering how the loan will impact you while in school and after graduation, you can plan effectively, avoid unexpected challenges and ensure that this financial aid option supports your journey through education in the best way possible.

Advantages of Unsubsidized Loans

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    No requirement to demonstrate financial need

    Unsubsidized loans don't require you to demonstrate financial need, which opens them up to a broader range of students. This aspect is especially beneficial for students who may not qualify for need-based financial aid but still require assistance to fund their education.

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    Available during all academic years

    Unsubsidized loans are available to students throughout their academic journey, from undergraduate to graduate studies. This continuous availability allows for consistent financial support as you progress through different levels of education.

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    Higher borrowing limits

    Unsubsidized loans typically have higher annual and total loan limits than subsidized loans. This means you can potentially borrow more money to cover your educational expenses, which is particularly beneficial if you have higher costs or if other financial aid doesn't fully cover your needs.

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    Interest capitalization options

    While you are responsible for the interest that accrues on an unsubsidized loan from the time it's disbursed, you can pay it as you go or let it capitalize. Capitalizing the interest means adding it to the principal amount of your loan, which you can pay back after graduation. This flexibility can help manage your finances while in school, though it will increase the total amount you repay over time.

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    Flexible repayment plans

    Unsubsidized loans offer a variety of repayment plans, including standard, graduated and income-driven options. This flexibility allows you to tailor your repayment strategy to your unique financial circumstances, making managing your loan easier and reducing financial stress after graduation.

Disadvantages of Unsubsidized Loans

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    Interest accrues immediately

    From the moment an unsubsidized loan is disbursed, interest begins to accumulate. This means the total amount you owe will grow while you're still in school and during any deferment or grace periods. If not managed properly, this can significantly increase the overall cost of your loan by the time you begin repayment.

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    Can lead to higher debt

    Because unsubsidized loans often have higher limits, it can be tempting to borrow more than you need. This can lead to a higher debt burden upon graduation. It's helpful to consider your current needs and your future ability to repay when deciding how much to borrow.

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    More responsibility on the borrower

    With unsubsidized loans, the borrower is responsible for all the interest that accrues, even while in school. This adds an extra layer of responsibility as you need to be mindful of how interest accumulates and consider making interest payments while still studying to keep the total loan cost down.

How Much You Can Borrow With an Unsubsidized Loan

The amount you can borrow with an unsubsidized loan each year depends on several factors, including your year in school and whether you're considered a dependent or independent student. Additionally, the specific amounts can vary depending on your school's cost of attendance and any other financial aid you might be receiving.

The table below presents the annual borrowing limits for unsubsidized loans:

Student Status
First-Year Undergraduate
Second-Year Undergraduate
Third-Year Undergraduate and Beyond
Graduate Student


Up to $5,500

Up to $6,500

Up to $7,500



Up to $9,500

Up to $10,500

Up to $12,500

Up to $20,500

Remember that the total amount you're allowed to borrow over your academic career (aggregate limit) is $31,000 if you're a dependent undergraduate, $57,500 if you're an independent undergraduate or $138,500 if you're a graduate student. These limits are relevant as they dictate the maximum support you can receive from unsubsidized loans throughout your education.

Requirements for an Unsubsidized Loan

Unsubsidized loans have specific eligibility requirements that you need to meet. Understanding these helps ensure you qualify for the financial aid necessary to support your education.

Here are the main eligibility requirements:

  • You must be enrolled at least half-time in an eligible degree or certificate program.
  • You need to maintain satisfactory academic progress as defined by your school.
  • You must complete the FAFSA.
  • You must be a U.S. citizen, national or permanent resident.
  • You must have a valid Social Security number.
  • You must have no loan defaults or owe a refund to any previous aid program.

Meeting these criteria is the first step in securing the funds you need.

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The cost of attendance for unsubsidized loans is a calculated estimate of all the expenses you might incur during one academic year while pursuing your education. This figure influences the maximum loan amount you're eligible to receive. The cost of attendance generally encompasses the following:

  • Tuition and fees
  • Room and board
  • Books and supplies
  • Transportation
  • Personal expenses

Each educational institution calculates its cost of attendance, which serves as a guideline for how much financial aid, including unsubsidized loans, you may need to fund your education.

How to Get an Unsubsidized Loan

Understanding the steps to apply for an unsubsidized loan helps guide you through securing financial aid for your education. It helps ensure you meet all requirements and deadlines, making the journey smoother and more predictable.

Complete the FAFSA

Start by filling out the FAFSA, the gateway to all federal student aid. This form requires detailed personal and financial information, so have your and your family's tax returns and other financial documents ready. The information you provide will determine how much and what type of aid you're eligible for, including unsubsidized loans. Submit the FAFSA before the deadline to ensure you get the assistance you need.

Review Your FAFSA Submission Summary

After submitting your FAFSA, you'll receive a summary of your submission. This summary is crucial as it reflects the data you provided and allows you to verify its accuracy. The Student Aid Index (SAI) will replace the Expected Family Contribution (EFC) starting in the 2024–2025 school year to provide a more accurate measure of your ability to pay for college. Ensure all the details are correct, as they influence your Student Aid Index and the amount of aid you might receive.

Evaluate Your Financial Aid Offer

Once your chosen school receives your FAFSA information, it’ll craft a financial aid offer for you. This will detail the types and amounts of aid you're eligible for, including unsubsidized loans. Review this offer thoroughly to understand the conditions and only borrow what's necessary for your education. Borrowing wisely now means a more manageable repayment later.

Accept the Loan and Complete Counseling

You must undergo entrance counseling if you decide to take the unsubsidized loan. This process educates you on the responsibilities of borrowing a federal loan and helps you understand repayment terms, interest accumulation and debt management strategies. Completing this counseling is mandatory and helps ensure you make an informed decision.

Sign the Master Promissory Note (MPN)

The final step in securing your unsubsidized loan is to sign the MPN. This legal document outlines your commitment to repay the loan and any accrued interest. By signing the MPN, you legally agree to fulfill the loan's repayment terms, solidifying your commitment to your financial future. Reading and understanding all the terms and conditions is crucial before signing.

FAQ About Unsubsidized Student Loans

MoneyGeek answered some frequently asked questions about unsubsidized loans, helping you understand how they work, what they cost and how they might affect your future.

How much can I borrow with an unsubsidized loan?
Are there fees associated with unsubsidized loans?
When do I need to start repaying my unsubsidized loan?
Can I defer or forbear my unsubsidized loan payments?
Can unsubsidized loans be forgiven?

About Christopher Boston

Christopher Boston headshot

Christopher (Croix) Boston was the Head of Loans content at MoneyGeek, with over five years of experience researching higher education, mortgage and personal loans.

Boston has a bachelor's degree from the Seattle Pacific University. They pride themselves in using their skills and experience to create quality content that helps people save and spend efficiently.

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