Understanding Your Interest Subsidy (for U.S. Federal Direct Subsidized Loans)

For U.S. Federal Direct Subsidized Loans, the U.S. Department of Education typically pays the interest that accrues on your loan:

• While you are enrolled in school at least half-time.
• During the six-month grace period after you leave school or drop below half-time enrollment.
• During authorized periods of deferment (e.g., for economic hardship, unemployment).

The "Total Interest Subsidized" value estimated above is the amount of interest the government would pay on your behalf during the specified subsidy period. This means this interest does not get added to your loan principal (a process called capitalization).

Why this matters: On unsubsidized loans (and on subsidized loans *outside* of these specific periods), any unpaid interest typically accrues and may capitalize, meaning it's added to your principal balance. This increases the overall amount you owe and the total interest you'll pay over the life of the loan. The interest subsidy is a significant benefit that helps keep your loan balance from growing while you are not required to make payments.

Always verify your specific loan terms and subsidy benefits with your loan servicer or through studentaid.gov.