What is the difference between subsidized and unsubsidized Direct Loans?

The main difference between subsidized and unsubsidized Direct Loans is the interest that accrues on the loan while the borrower is in school. Subsidized Direct Loans are need-based, and the federal government pays the interest on the loan during certain periods, such as while the borrower is enrolled in school at least half-time, during deferment periods, and during the six-month grace period after leaving school. On the other hand, unsubsidized Direct Loans are not need-based, and the borrower is responsible for paying all the interest that accrues on the loan from the time it is disbursed until it is fully repaid. Both types of loans have annual and lifetime limits, and the amount that can be borrowed depends on the student's grade level and dependency status.