What Is Direct Subsidized Loan?

Almost everyone needs loans at some point in time and one of such loans that has come to the rescue of many is the direct subsidized loan. Now one may ask, “What is Direct Subsidized Loan?” Well, that is simple although it is also possible that you may have benefitted from a direct subsidized loan without knowing what it was.

Therefore, I’m going to explain what it is to you and what the advantages and disadvantages are (if any) in the subsequent paragraphs.

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What is a Direct Subsidized Loan?

A Direct Subsidized Loan is a federal student loan offered to needy students so they can pay for their college education and later pay back the loan after graduating. With the Direct Subsidized Loan, borrowers are not mandated to pay interest on their loans whiles in school, during grace period (first six months after graduating) and during deferments (postponement of loan payments) as well. They (borrowers) only begin to pay interest on the loan after their grace period.

The Direct Subsidized Loan has been made possible through the William D. Ford Federal Direct Loan Program. As we speak, there are over 40 million borrowers with either a direct subsidized loan or direct unsubsidized loan.

This type of federal loan is sometimes also referred to as Subsidized Stafford Loans and generally come with a lower interest rates as compared to the Direct Subsidized Loan. The current interest rate on this type of federal loan is 3.73% from July 1, 2021 to July 1, 2022.

Eligibility Criteria

To be eligible for this type of Loan, an applicant must meet the following eligibility requirements;

  • Must be an undergraduate
  • Must be a financially needy student.
  • Borrower must not exceed the subsidized loan limit
  • Valid Social Security Number
  • U. S Citizenship or other eligible foreigners.

READ ALSO: Difference Between A Subsidized And An Unsubsidized Loan

How To Apply

  • To apply for a Direct Loan, students or applicants must fill and complete a Free Application for Federal Student Aid (FAFSA) form here https://studentaid.gov/h/apply-for-aid/fafsa.
  • Now submit the FAFSA form
  • Lastly, you reach out to your school’s financial aid office so they can assess your situation and determine how much you will be given depending on your need.

NB: the deadlines for submitting FAFSA forms for a Subsidized Loan varies from state to state and college to college as well. Therefore, find out what the deadline is in your state when applying.

Be mindful also of the fact that the information you enter in the FAFSA form is what is used by the financial aid office of your school to determine how much aid you need.


  • Lower interest rates as compared to direct unsubsidized loans.
  • Government pays interest on subsidized loans whiles you’re in school, during grace period (first six months after graduating) and during deferments (postponement of loan payments) as well.

NB: although direct subsidized loans are much better than unsubsidized loans, they also have certain limits. Examples of such limits are; accessible to only undergraduate students and must also be able to prove that they really need financial aid.


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