Subsidized vs. Unsubsidized Student Loans: What’s the Difference?

Updated May 16, 2022 · 3 Min Read

Reviewed by Lonnie Woods III
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Are you aware of the differences between subsidized and unsubsidized student loans? Read on to discover which might be the best choice to fund your nursing education.

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Subsidized vs. Unsubsidized Student Loans: What’s the Difference?
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Financial aid options for your nursing education include both subsidized and unsubsidized federal student loans. If you're uncertain about which might be better for you, you're not alone. Figuring out how to pay for school can be as stressful as it is important. Each type of loan has its place in the financial aid and student loan landscape, and while it can be challenging to figure out, this guide can empower you to understand the basics and make some smart choices in the interest of your education and your professional future.

What are Subsidized and Unsubsidized Student Loans?

If you're wondering about the best strategies for paying for your nursing education, you're in good company. Possibilities — which include loans, grants, and scholarships — can be overwhelming. When words like "subsidized" and "unsubsidized" get thrown around, maybe your eyes start to glaze over.

Subsidized Student Loans

Often referred to as a direct subsidized loan, this form of federal student loan is made through the William D. Ford Federal Direct Loan Program. With subsidized loans, interest does not accumulate while you are in school at least half-time or during periods of deferment.

Unsubsidized Student Loans

Unsubsidized student loans come from the U.S. government under the auspices of the Direct Loan Program. These loans accrue interest even while you are in school and during deferment periods.

Who is Eligible?

In terms of eligibility, direct subsidized student loans are available to undergraduate students who demonstrate financial need based on their Free Application for Federal Student Aid (FAFSA).

For direct unsubsidized student loans, candidates include graduate, undergraduate, and professional degree students. Applicants do not need to demonstrate financial need, but they must still complete the FAFSA.

How Much Can You Borrow?

The borrowing power of student loans is likely one of your major concerns when budgeting for your education. You should be aware of some specific details about these particular loan programs.

With direct subsidized student loans, $3,500 is the maximum you can receive for your first year. The loan amount cannot exceed the financial need identified via your FAFSA. If you're also receiving an unsubsidized student loan, the total can't exceed $5,500.

For independent students and those dependent on parents who do not qualify for federal PLUS loans, the maximum amounts are $9,500 and $33,500, respectively.

If you're receiving an unsubsidized student loan, your maximum loan amount is $5,500 for the first year.

Maximum loan amounts increase with each subsequent year of school as follows:

  • Second year of undergraduate education: You have a $6,500 combined loan maximum, with a maximum of $4,500 allowed to be subsidized. (For independent students and those dependent on parents who do not qualify for federal PLUS loans, the respective amounts are $10,500 and $4,500.)
  • Third year of undergraduate education and beyond: You have a $7,500 combined loan maximum, with a maximum of $5,500 allowed to be subsidized. (For independent students and those dependent on parents who do not qualify for federal PLUS loans, the amounts are $12,500 and $5,500, respectively.)
  • The aggregate allowed maximum is $31,000 with $23,000 subsidized. (For independent students or for those dependent on parents who do not qualify for federal PLUS loans, these respective amounts are $57,500 and $23,000.)
  • For graduate and professional degree students (all of whom are considered independent), the maximum aggregate amount of unsubsidized loans is $138,500, of which $65,500 can be subsidized.

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Which Type of Loan is Right for Me?

The Bureau of Labor Statistics projects a 9% job growth for registered nurses between 2020 and 2030. These professionals earned a median annual salary of $77,600 as of 2021. Even for students pursuing careers with above-average salaries, like nursing, borrowing money for school can produce a certain amount of anxiety.

The pros of direct subsidized student loans include deferred interest until six months after graduation and an increased amount of allowed borrowing for each subsequent year of study. You may also be able to negotiate repayment in the future if necessary.

The cons include graduating with debt and the fact that interest begins accruing six months after graduation, whether you have a job or not. The amounts you can borrow are also relatively low.

The pros of unsubsidized loans include fixed interest rates and not having to demonstrate financial need in order to qualify. The cons include amassing debt that will come due as soon as you graduate.

For nursing students, choosing between or both loan types depends on individual need and relative risk aversion regarding the amount of debt they want to take on after graduation.

Frequently Asked Questions About Subsidized vs. Unsubsidized Student Loans for Nurses


What is the grace period for subsidized student loans?

The grace period for all federal student loans, both subsidized and unsubsidized, is six months. When a student graduates, leaves school, or drops below half-time enrollment, they have six months before they must begin making payments.

How can nurses apply for subsidized or unsubsidized student loans?

Applications for both loans are made using the Free Application for Federal Student Aid (FAFSA). Unsubsidized loans do not require applicants to demonstrate financial need.

What kind of loan is best for ADN or BSN students?

ADN and BSN students should consider their individual financial needs and projected earning potential when determining which loan is best for their circumstance.

What kind of loan is best for MSN or DNP students?

MSN and DNP students should think about their individual financial needs and projected earning potential before choosing the best loan for their situation.

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Page last reviewed: May 5, 2022

NurseJournal.org is an advertising-supported site. Featured or trusted partner programs and all school search, finder, or match results are for schools that compensate us. This compensation does not influence our school rankings, resource guides, or other editorially-independent information published on this site.

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