What is the difference between subsidized and unsubsidized loans?

Subsidized and unsubsidized loans are both types of federal student loans with certain differences. Subsidized loans are based on financial need, and the government pays the interest on these loans while the borrower is in school, during the grace period after graduation, and during any deferment periods. On the other hand, unsubsidized loans are not based on financial need, and the borrower is responsible for paying all the interest that accrues on the loan. This interest can be paid while in school or can be deferred and added to the loan balance. Unlike subsidized loans, unsubsidized loans are available to both undergraduate and graduate students. Ultimately, understanding these differences is crucial for students to make informed decisions about their financial aid options based on their individual circumstances.