Chime® is a financial technology company, not a bank. Banking services provided by The Bancorp Bank, N.A. or Stride Bank, N.A., Members FDIC.

What Is a Subsidized Loan?

Chime Team • April 2, 2024

Easy online banking

  • Checking Account with no monthly fees
  • 50,000+ fee-free ATMs~
  • Chime Visa® Debit Card
Get Started

Subsidized Loan

A subsidized loan is a type of financial aid where the interest is partially or fully paid by another party, often the government, during certain periods. This arrangement makes subsidized loans particularly appealing for eligible borrowers, as it can significantly reduce the cost of borrowing. Typically, interest payments on these loans are deferred while the borrower is in school, during a grace period, or during other specified deferment periods, ensuring that the loan balance does not increase during these times.

Examples of subsidized loans include the Direct Subsidized Loans offered to undergraduate students in the United States who demonstrate financial need. With Direct Subsidized Loans, the U.S. Department of Education pays the interest while the student is in school at least half-time, for six months after the student leaves school (referred to as a grace period), and during deferment periods.

The importance of subsidized loans lies in their role in making education, housing, and other vital services more accessible to those who might otherwise be unable to afford them. By reducing the total interest paid over the life of a loan, subsidized loans lower the financial barriers to higher education and encourage economic mobility.

Typically, eligibility for subsidized loans is based on financial need, which is determined by the borrower’s income and other factors. Because the interest that accrues during certain periods is covered by the government or another entity, the total cost of borrowing is significantly reduced compared to unsubsidized loans, where interest accrues from the time the loan is disbursed.

Students and families can consider subsidized loans as part of their financial planning for college, understanding the long-term benefits of reduced interest costs. By reducing the amount of money needed to cover interest, individuals can allocate their resources more effectively to other financial goals.

Subsidized loans make higher education more accessible, contributing to higher levels of educational attainment, which can lead to better job prospects and economic growth. Additionally, by providing more equitable access to education and housing, subsidized loans play a crucial role in promoting economic mobility and reducing income inequality.

Borrowing is made more affordable for those with demonstrated needs, thanks to subsidized loans, which offer significant benefits, including reduced total loan costs and increased accessibility to essential services like education. Understanding and utilizing subsidized loans within your personal financial planning can maximize their benefits and support long-term financial goals.

Easy online banking

  • Checking Account with no monthly fees
  • 50,000+ fee-free ATMs~
  • Chime Visa® Debit Card
Get Started

Chime® is a financial technology company, not a bank. Banking services are provided by The Bancorp Bank, N.A. or Stride Bank, N.A., Members FDIC. The Chime Visa® Debit Card and the Chime Credit Builder Visa® Credit Card are issued by The Bancorp Bank, N.A. or Stride Bank pursuant to a license from Visa U.S.A. Inc. and may be used everywhere Visa debit and credit cards are accepted. Please see the back of your Card for its issuing bank.

While Chime doesn’t issue personal checkbooks to write checks, Chime Checkbook gives you the freedom to send checks to anyone, anytime, from anywhere. See your issuing bank’s Deposit Account Agreement for full Chime Checkbook details.

By clicking on some of the links above, you will leave the Chime website and be directed to a third-party website. The privacy practices of those third parties may differ from those of Chime. We recommend you review the privacy statements of those third party websites, as Chime is not responsible for those third parties' privacy or security practices.

Third-party trademarks referenced for informational purposes only; no endorsements implied.

‡ SpotMe® for Credit Builder is an optional, no interest/no fee overdraft line of credit tied to the Secured Deposit Account. SpotMe on Debit is an optional, no fee service attached to your Chime Checking Account (individually or collectively, “SpotMe”). Eligibility for SpotMe requires $200 or more in qualifying direct deposits to your Chime Checking Account each month.

Opinions, advice, services, or other information or content expressed or contributed here by customers, users, or others, are those of the respective author(s) or contributor(s) and do not necessarily state or reflect those of The Bancorp Bank, N.A. and Stride Bank, N.A. (“Banks”). Banks are not responsible for the accuracy of any content provided by author(s) or contributor(s).

~ Out-of-network ATM withdrawal and over the counter advance fees may apply except at MoneyPass ATMs in a 7-Eleven, or any Allpoint or Visa Plus Alliance ATM.

Address: 101 California Street, Floor 5, San Francisco, CA 94111, United States.

No customer support available at HQ. Customer support details available on the website.

© 2013-2024 Chime Financial, Inc. All rights reserved.