When discussing financial aid, commonly used terms include subsidized and unsubsidized, but what is the difference between those two words in regards to student loans?
Direct Subsidized Federal Loans are available to undergraduate students who demonstrate financial need. The US Department of Education pays the interest on your loan while you are in school (at least half-time status), for the first 6 months (grace period) after you leave school, and during any deferment (postponement) periods.
Direct Unsubsidized Federal Loans are available to undergraduate and graduate students. Demonstrating financial need is not a requirement. You are responsible for paying interest during the life of the loan. While in school, during the grace period, and during deferment or forbearance, you may choose to let your interest accrue, as opposed to making payments. The accrued interest is added to the principal of the loan.