Subsidized versus Unsubsidized
Subsidized and unsubsidized loans are federal student loans for eligible students to help cover the cost of higher education at a four-year college or university, community college, or trade, career, or technical school. The U.S. Department of Education offers eligible students at participating schools Direct Subsidized Loans and Direct Unsubsidized Loans.
Outcomes
- Unsubsidized loans overborrowing: Students will understand the Experimental Site Initiative that San Diego City College and the U.S. Department of Education are participating in - that attempts to reduce or eliminate unnecessary overborrowing for specific groups of students. These groups are First year students and students not meeting Satisfactory Academic Progress (SAP).
- Cohort Default Rate: Students will understand their responsibility in repaying Federal Direct student loans and using a third-party servicer - their options to avoid going into default when they are delinquent in their loan payments.
What's the difference between Direct Subsidized Loans and Direct Unsubsidized Loans?
In short, Direct Subsidized Loans have slightly better terms to help out students with financial need.
Here is a quick overview of Direct Subsidized Loans
Who can get Direct Subsidized Loans?
Direct Subsidized Loans are available to undergraduate students with financial need.
How much can you borrow?
A community college student may borrow up to $3,500 as a first year student and up
to $4,500 as a second year student.
Who will pay the interest?
The U.S. Department of Education pays the interest on a Direct Subsidized Loan:
while you're in school at least half-time,
- for the first six months after you leave school (referred to as a grace period), and
- during a period of deferment (a postponement of loan payments).
*Note: If you received a Direct Subsidized Loan that was first disbursed between July
1, 2012, and July 1, 2014, you will be responsible for paying any interest that accrues
during your grace period. If you choose not to pay the interest that accrues during
your grace period, the interest will be added to your principal balance.
Here is a quick overview of Direct Unsubsidized Loans
Who can get Direct Unsubsidized Loans?
Direct Unsubsidized Loans are available to undergraduate and graduate students; there
is no requirement to demonstrate financial need.
How much can you borrow?
Your school determines the amount you can borrow based on your cost of attendance
and other financial aid you receive.
Who will pay the interest?
You are responsible for paying the interest on a Direct Unsubsidized Loan during all
periods.
*Good to know: If you choose not to pay the interest while you are in school and during
grace periods and deferment or forbearance periods, your interest will accrue (accumulate)
and be capitalized (that is, your interest will be added to the principal amount of
your loan).
Here is a quick overview of Federal Direct Plus Loan
*For a list of current interest rates and fees, please visit https://studentaid.gov/understand-aid/types/loans/interest-rates.
*Before submitting your Loan Request Form,
- student must be in good academic standing with FA
- complete the electronic Master Promissory Note (eMPN); and
- complete Entrance Counseling.
Unsubsidized Loan Categories
The Federal Government does not make a distinction for the Unsubsidized loan program, but we will refer to four different Unsubsidized loans categories to help explain the different eligibility criteria and the different loan processes. The loan categories are:
Students with No Need
Students with no need and who do not qualify for the Subsidized Loan may be eligible for:
- Up to $3,500 per year - 1st year student
- Up to $4,500 per year - 2nd year student
- Students can use the regular loan request form to apply for this Unsubsidized loan
- No other special action or process needed by student
Dependent/Special Circumstances Unsubsidized
- Dependent students with a Rejected FAFSA because parents did not or will not provide their information
- May borrow up to $2,000 per year
- Students can use the regular loan request form to apply for this Unsubsidized loan
Dependent Additional Unsubsidized
Dependent students can only qualify if their parents cannot borrow a PLUS loan due to various situations
- May borrow up to $2,000 per year
- Students must complete Supplemental Loan Counseling and meet all other eligibility criteria
- 1st year student does not qualify due to Experimental Site Initiative
Independent Additional Unsubsidized
- May borrow up to $6,000 per year
Additional Unsubsidized Loan Process (General Eligibility)
- Must complete a FAFSA for the 2020-21 school year
- Must be enrolled in 6 or more units at San Diego City College for each semester
- Must be in Good Standing based on the FA Satisfactory Academic Progress (SAP) standards and did not have to appeal
- The maximum amount for one semester will be one half (1/2) of the annual loan limit
Effective with the 2012-2013 school year, San Diego City College (along with San Diego Mesa College and San Diego Miramar College) were approved by the U.S. Department of Education to participate in an experimental initiative regarding "Overborrowing" that allows our college to reduce or limit Unsubsidized Loan eligibility and borrowing for certain groups or categories of students.
Based on this experiment, the following groups or categories of students will not be eligible to borrow Unsubsidized Loans:
- 1st Year students
- Students approved on FA appeal
See below for further information.
First Year Students
1st year is defined as a student who has completed less than 30 units in his/her current program or major based on the student's educational plan.
- Units that will be counted towards the 30 units are units the fulfill the major, general ed or district requirements for your current program or major based on your academic plan.
- Units that will not be counted towards the 30 units are units that are basic skills or remedial, ESOL, electives or any other units that are not applicable to your current program or major based on your academic plan.
Students Approved on FA Appeal
If you did not meet the FA Standards for Satisfactory Academic Progress (SAP) you will not be eligible for an Unsubsidized Loan even if you submit a FA Appeal and are approved for other aid.
Alternative Loans
We do not recommend students borrow an alternative loan unless they have no other option.
Alternative loans are private loans that you borrow through a lending institution and are not part of the federal government programs. Alternative loans are more expensive than the federal government Direct Loans and should only be used when all other options have been exhausted. Most lenders do credit checks in order for you to qualify for a loan.
In addition to completing the Alternative Loan application, you will also need to complete a FAFSA application before our office can certify an Alternative Loan application. We take into consideration all other aid you are eligible for including the Federal Direct Subsidized loan and the Federal Direct Unsubsidized loan, if eligible.
Be sure to research all possibilities for scholarships, grants, Work Study, and federal loan programs before borrowing from an alternative loan program. You are always free to choose the lender of your choice. Choose the loan that best suits your needs and remember to borrow only what you need!
Educational Credit Management Corporation (ECMC)
ECMC is a non-profit company that works with San Diego City College to provide FREE one-on-one counseling to students to avoid defaulting on your student loans.
Counseling options:
- Discuss options for manageable repayment
- Learn important facts about forbearance and deferment
- Access your balance and know your servicer
- Discover best practices to manage your loans
- Guidance if you fall behind on payments or are nearing default
- Financial literacy resouces
For more information visit ECMC.