For better or for worse, student loans are becoming the dominant way that college students cover their tuition and expenses.

According to data from the Federal Reserve . . .

  • As of 2017, student loan debt stood at $1.4 trillion.
  • Over 44 million Americans currently have student loan debt.
  • 10 years ago, college graduates left school with roughly $20,000 in loans. By 2015, students were leaving college owing $34,000.

The above numbers show that optimal management of your student loan is no luxury - it's a necessity.

To keep your student loan debt obligations in check, start by educating yourself on students, especially on the topic of subsidized versus unsubsidized student loans.

Student loans do come in different forms and flavors, but perhaps the biggest distinction is between subsidized and unsubsidized student loans.

Both public (The U.S. Department of Education, for example) and private (most banks and some credit unions) offer student loans, but Uncle Sam is the primary purveyor of subsidized and unsubsidized loans.

Here's how each differs from one another:

Subsidized Student Loans

Subsidized student loans, more formally known as "Direct Subsidized Loans" offer more financially friendly terms than unsubsidized loans, as follows:

  • Direct Subsidized Loans are offered to students and families that demonstrate financial need for college financing help.
  • The college the student attends ultimately decide how much a student can get in a subsidized student loan, although the loan amount cannot be higher than the financial need demonstrated by the student and his/her family.
  • In a big benefit to financially needy college students, the federal government, via the Department of Education, pays the interest on a federal subsidized loan if you attend school at least on a half-time basis; during school; for the first six months after you leave school; and during any period of deferment (when a student loan repayment schedule is suspended.)

Unsubsidized Student Loans

  • Direct unsubsidized loans are offered to college students with no requirement of financial need.
  • As with subsidized loans, unsubsidized student loan amounts are at the discretion of the college the student attends, usually based on financial data from the student's FAFSA financial aid form.
  • A student who accepts an unsubsidized student loan is responsible for paying that loan off, with no help from the federal government.
  • If an unsubsidized student loan borrower needs to suspend repayment due to financial difficulties, that student will still be responsible for paying off the loan, and will see interest accrue on the loan during any payment suspension periods.

How Much Can You Borrow For Student Loans?

As noted above, the student's college or university is the ultimate arbiter on how much subsidized and unsubsidized student loan cash you can borrow.

Limits to the amount of money you can borrow from subsidized and unsubsidized student loans also depends on the school year you're attending (i.e., freshman versus sophomore year) and whether you're deemed a dependent and independent student by the federal government.

Here's a breakdown of student loan limits, for both subsidized and unsubsidized student loans Data from the U.S. Department of Education:


Dependent students are limited to $5,500, and no more than $3,500 of this amount may be in subsidized loans.

Independent students are limited to $9,500, and no more than $3,500 of this amount may be in subsidized loans.


Dependent students are limited to $6,500. No more than $4,500 of this amount may be in subsidized loans.

Independent students are limited to $10,500. No more than $4,500 of this amount may be in subsidized loans.

Third-Year and Beyond (Undergrad)

Dependent students are limited to $7,500. No more than $5,500 of this amount may be in subsidized loans.

Independent students are limited to $12,500-No more than $5,500 of this amount may be in subsidized loans.

Graduate or Professional Students 

$20,500 (unsubsidized only, as all graduate students are deemed as independent for student loan purposes.)

Subsidized and Unsubsidized Aggregate Loan Limits

  • Subsidized: $31,000 - No more than $23,000 of this amount may be in subsidized loans.
  • Unsubsidized: $57,500 for undergraduates - No more than $23,000 of this amount may be in subsidized loans. $138,500 for graduate or professional students - No more than $65,500 of this amount may be in subsidized loans. The graduate aggregate limit includes all federal loans received for undergraduate study.

How Interest Works on Student Loans

Student loans vary from traditional, private sector loans like mortgage loans and auto loans in several ways.

For starters, you start repaying mortgage and auto loans within a month or two. Not so for student loans. With a college loan, you don't start paying it back until after six months (or later) after your graduate.

Additionally, if you run into financial difficulties with a student loan, you can put the brakes on, and ask for forbearance, which allows you to suspend payments until you're ready to start making payments again. While that is possible in rare circumstances with auto or mortgage loans, in general, you need to keep paying your non-student loans - no matter what.

Interest-wise, student loans can be complicated, and it's up to student borrowers and their parents to know the ropes.

Basically, your interest terms are laid out in your student loan promissory notes, issued to the borrower along with the student loan disbursement.

When you get that note, read it carefully, and focus on these important contract items:

  • The student loan disbursement date. This is the date when the promissory note arrives.
  • The amount of cash borrowed. This is the total loan amount.
  • The loan interest rate. The percentage of the loan you have to pay to borrow the money.
  • The interest accrual rate. This explains if loan interest is charged by the lender on a daily or monthly basis.
  • The loan's initial payment date. This is when the borrower has to start paying the loan back.
  • The loan's payment schedule. How many payments you have to make during the course of the loan timetable.
  • For subsidized student loan borrowers, the federal government will handle your loan interest payments while you're in school. Upon graduation, those interest payments will be your repayment responsibility.
  • For unsubsidized student loan borrowers, the lender begins charging interest on the loan on the day the loan is initially dispersed. Even though the student doesn't have to make any payments before graduation (although he or she is free to do so beforehand), interest is running the whole time.

So, the earlier you start repaying your student loan, the lower our ultimate student loan costs.

How to Get a Student Loan

Basically, subsidized and unsubsidized student loans offer the same path to approval - with a few caveats.

Your loan eligibility really depends on the student/family's financial situation, summed up on the FAFSA financial aid form that is sent out by the family and is vetted by the federal government.

By and large, you'll qualify for dependent status if your estimated family contribution isn't enough to pay for attending a specific college or university. The U.S. Department of Education, which runs the FAFSA process, uses an index to calculate a family's expected contribution for college costs, including tuition, room and board, living expenses, and books and supplies.

Let's say your cost of attendance is $20,000 per year for favored college or university. If the FAFSA index reports back that your expected family contribution is $10,000, then you're eligible for $10,000 in financial aid.

Other than that, it's the loan limits that separate subsidized and unsubsidized loan borrowers heading to campus.

Once you're ready to apply, take these specific steps to get a federal student loan:

  • Fill out the FAFSA form, or the Renewal FAFSA if you're returning to college. Do so at
  • Wait for a response, which takes a few weeks. Once you get your financial aid award letter (from your chosen college's financial aid office) review it thoroughly. The aid note will spell out all available financial aid, including any subsidized or unsubsidized student loans.
  • Write back to the college's financial aid office (by regular mail or email) and accept the financial award package, including loans.
  • Read and sign all loan documents, including the Master Promissory Note.

After all that, you're locked in and ready for college - and all that student loan debt you've accumulated.