Did you know that any student who fills out a FAFSA—no matter how wealthy—can take a federal “unsubsidized” loan? The key word here is “unsubsidized”.
The government only awards “subsidized” loans to students whose FAFSA indicates they need aid to attend their college. The key word here is “need”, which is determined by their wealth.
What is an 'unsubsidized' loan?
In short the loan's interest charge builds up while the student is in school. So if you took out, say, $1000 in loan, you owe the $1000 + 4% of annual interest, which comes to be roughly $1200. With subsidized loans, the government pays the interest, so you owe only $1000 after the four years of college.
Here’s a quick summary of Direct Unsubsidized Loans: