The Difference between Subsidized and Unsubsidized Student Loans

This video explains the difference between subsidized and unsubsidized student loans. "Subsidized" means that the U.S. government pays the interest that accrues while the student is attending school at least half-time, in a grace period, or in deferment. Unsubsidized begin incurring interest immediately, and the interest is added to the loan’s balance at the end of each period assuming the student does not pay the interest. The video provides an example to illustrate how this process (known as interest capitalization) works with an unsubsidized loan.

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This video was funded by a Civic Engagement Fund grant from the Gephardt Institute for Civic and Community Engagement at Washington University in St. Louis.—
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