Unsubsidized loan

The institution determines the remaining annual limit after any subsidized loan and other aid, then certifies the unsubsidized amount. Interest accrues daily. The borrower can make voluntary interest payments or let the interest capitalize at the end of the grace period or deferment. Repayment of principal and interest begins after the grace period.

Example: a graduate student receives a $20,500 Direct Unsubsidized Loan. Interest starts accruing immediately at the current rate. If the student does not pay the interest during two years of enrollment, several thousand dollars of interest capitalize when repayment begins, raising both the principal and the monthly payment.

A subsidized loan has an interest subsidy during in-school, grace, and certain deferment periods and is available only to undergraduates with need. PLUS loans are also unsubsidized but are credit-checked and available to parents and graduate students. Private loans may have different interest and capitalization rules.

Assuming unsubsidized loans are interest-free while the student is enrolled. Forgetting that capitalized interest reduces remaining aggregate eligibility. Treating the unsubsidized annual limit as available on top of the maximum combined limit rather than as part of it.