There are two main types of federal loans subsidized federal loans and unsubsidized federal loans, in this article we would be explaining what a subsidized loan is, functions, eligibility requirements and also the process of applying for one.

 Federal Loans
student-loans

What is a Subsidized Federal Loan?

A subsidized federal loan is a student loan for undergraduate students who demonstrate financial need as determined by your cost of attendance minus expected family contribution and other financial aid. These type of loans do not accrue interest while you are in school at least half-time or during deferment periods because the government temporarily covers interest costs. To apply for a subsidized federal loan you will need to fill a FAFSA form and we have an article on the application process here.

Functions of Subsidized Federal Loans

These are some important functions of subsidized federal loans such as:

  1. Subsidized federal loans give qualifying lenders access to education without additional interest payments during the deferment period.
  2. To lower the barrier to education for students from low income areas and families
  3. To provide equal/proportionate access to education for qualifying students in the US.

Eligibility Requirements for Subsidized Federal Loans

Subsidized federal loans are designed to give fair access to education and as a result, they are meant to be easy to access. Here are some of the requirements for access a loan:

  • Be enrolled in a degree-seeking program
  • Must have completed and submitted your FAFSA
  • Be enrolled half time (6 credits for undergraduates and 5 for graduates)
  • Meet the minimum requirements for Satisfactory Academic Progress
  • Not be in default on previous federal direct loans

How To Apply For A Subsidized Federal Loan

Step 1

To apply for a federal student loan, you must first complete and submit a Free Application for Federal Student Aid (FAFSA) form. We have an article on FAFSA here.

Step 2

You will automatically be considered for Direct Subsidized and Unsubsidized Loans if you submit the Free Application for Federal Student Aid (FAFSA). The loans will be added to your student aid Financial Aid Offer once awarding begins for the academic year (April for first time students and July for returning students).

First-time borrowers also need to complete Entrance Counseling and a Master Promissory Note at studentaid.gov. In most cases, you will only need to complete these items once during your college career.

Federal student loans require completion of the FAFSA to apply, necessitating adherence to the FAFSA deadline. The deadline is June 30. It is important to note that certain financial aid is distributed on a first-come, first-served basis, underscoring the importance of submitting the FAFSA early, particularly for those with significant financial need.

Step 3

Get your financial aid letter from your school to do this you’ll need to contact the school’s financial aid office to accept and complete any additional paperwork that might be required. You’ll also need to contact the financial aid office in order to appeal your award letter if you believe that the amount offered is insufficient to meet your needs.


David Brown

He is a writer covering financial news and trends. He has over 7 years of experience as a finance writer. He and his team are dedicated in providing a comprehensive resource for students and parents to make choices based on accurate and latest information in the student loan space.

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