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Approximately 43 million Americans have federal student loans, according to the Department of Education, or about 1 in 6 people.
If you're looking at your federal options, you're likely to be offered both subsidized and unsubsidized loans.
Subsidized loans begin accruing interest later, so how much you get of each will impact how much you owe when you graduate
In 2025, Congressional Republicans proposed overhauling student loan repayment options, including eliminating subsidized loans. The move would force borrowers to take out unsubsidized federal loans or private student loans, which don't offer protections like deferment or forbearance.
If that happened, it would save the U.S. government $14 billion dollars over the next 10 years, according to the Cato Institute, but raise undergraduate debt by an average of $6,000 per person.
What is a subsidized student loan?
Subsidized student loans allow you to borrow for an undergraduate education without accruing interest until after you've graduated or dropped below half-time enrollment. After graduation, most borrowers also receive a six-month grace period before they have to start making payments.
Subsidized loans are need-based, so borrowers must complete the FAFSA and qualify for financial assistance. They carry a slightly lower interest rate, but have lower annual limits, ranging from $3,500 to $5,500, depending on what year of school you're in.
Pros and cons of subsidized loans
Pros
- Government covers interest during school, grace periods, and deferments, potentially saving thousands of dollars
- Lower total cost compared to unsubsidized loans
Cons
- Must demonstrate financial need
- Only available to undergraduate students
- Lower borrowing limits
What is an unsubsidized student loan?
Unlike subsidized loans, you can qualify for an unsubsidized loan, regardless of your income or financial need.
Unlike subsidized loans, these are available to both undergraduate and graduate students. They also have higher lending limits: Undergraduate students can borrow anywhere from $5,000 to $12,500 and graduate students can borrow up to $20,500.
Most notably, interest begins accruing immediately — even while you're still in school. Because of that, experts suggest starting payments immediately.
Pros and cons of unsubsidized loans
Pros
- No financial need requirement
- Higher borrowing limits
- Lower interest rate
- Available to both undergraduate and graduate students
Cons
- Interest accrues from day one
- Interest not paid during school is added to the principal balance (capitalized)
Subsidized vs. unsubsidized loans
Subsidized loans give borrowers breathing room before interest kicks in. They are based on financial need, however, and have lower annual limits.
Unsubsidized student loans aren't need-based and are a good choice if you're a graduate student or your costs exceed subsidized limits
Both subsidized and unsubsidized loans are preferable over private loans because they offer fixed, lower interest rates, no credit checks, flexible income-driven repayment plans and government protections like forbearance, deferment, and eligibility for Public Service Loan Forgiveness (PSLF).
How to apply for federal student loans
Any student who wants to receive federal aid must submit a FAFSA application. It's free, although the deadline is late June.
If you file electronically, your application should be processed within 1 to 3 days and you'll receive a Submission Summary (formerly SAR) detailing how much federal aid you're entitled to.
Before you accept, see what grants, scholarships and work-study programs you've been approved for.
Federal loans vs. private student loans
If you receive no or insufficient federal aid, you can apply for private student loans. These carry a higher variable interest rate, require a credit check and are not eligible for federal protections like income-based repayment plans, deferment or forbearance.
So, it's best to exhaust your federal aid options before apply for private loans.
Unlike most lenders, Ascent considers borrowers without established credit, as well as those who meet the minimum credit requirements but not the income or repayment requirements. It looks at other factors, including the school, program, graduation date, major, GPA, cost of attendance and academic progress.
Ascent offers a discount of up to 1% for setting up autopay, four times what most lenders provide. It also gives 1% cash back on principal loan amounts at graduation.
- Considers borrowers with no credit
- High loan limit
- Co-signer release available after just 12 payments
- Up to 1% interest rate discount for autopay*
- 1% cash back rewards*
- Considers alternative requirements like the borrower’s school, program, graduation date, major, GPA, cost of attendance and Satisfactory Academic Progress (SAP) to grant approval
- Maximum fixed APR is on the high side
- Doesn't offer student loan refinancing
Disclosure: *Ascent Funding, LLC products are made available through Bank of Lake Mills or DR Bank, each Member FDIC. Subject to credit approval. Loan products may not be available in certain jurisdictions. Certain restrictions, limitations, terms and conditions may apply for Ascent's Terms and Conditions please visit AscentFunding.com/Ts&Cs. Annual Percentage Rates (APRs) displayed above are effective as of 3/1/2026 and reflect an Automatic Payment Discount (ACH). The ACH discount consists of 0.25% on credit-based college student loans submitted prior to 6/1/2025, a 0.5% discount for on credit-based college student loans submitted on or after 6/1/2025 and a 1.00% discount on outcomes-based loans when you enroll in automatic payments. Loans subject to individual approval, restrictions and conditions apply. Loan features and information advertised are intended for college student loans and are subject to change at any time. For more information, see repayment examples or review the Ascent Student Loans Terms and Conditions. The final amount approved depends on the borrower's credit history, verifiable cost of attendance as certified by an eligible school and is subject to credit approval and verification of application information. Lowest interest rates require full principal and interest (Immediate) payments, the shortest loan term, a cosigner, and are only available for our most creditworthy applicants and cosigners with the highest average credit scores. Actual APR offered may be higher or lower than the examples above, based on the amount of time you spend in school and any grace period you have before repayment begins. Variable rates may increase after consummation.1% Cash Back Graduation Reward subject to terms and conditions. For details on Ascent borrower benefits, visit AscentFunding.com/BorrowerBenefits. Ascent applicants and borrowers that agree to the AscentUP Terms of Service and Privacy Policy, as well as students associated with an Ascent parent loan application, have access to the AscentUP platform.
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