The federal government subsidizes the loan reimbursing the lender on the interest that accrues, until six months after the student graduates, leaves school, or drops below half-time status. Payment of principal on the loan may be deferred while you are in school. The difference is that the student is responsible for the interest, which begins accruing as soon as the loan is consummated . Students are given the option of paying or deferring interest payments while they are in school and until repayment of the principal balance begins. The federal government insures the loan, which provides for a low interest rate.
Unsubsidized loans increase the availability of funds.
Some schools fund their loans directly through the government's Direct Lending program. Most schools continue to use banks and other lenders. Some provide options for both. The Direct Lending program does not offer the loan discounts that several banks and other loan providers provide. Check with your financial aid office to determine which program they offer.