GradReady Practice Test 2026 - Free Practice Questions and Study Guide

The main idea here is how borrowing works in practice when it comes to subsidies. Private student loans are designed and issued by banks or lenders, and they don’t come with government subsidies. That means interest starts accruing from the moment the funds are disbursed, and the borrower (or a co-signer) is responsible for paying that interest, even if you’re still in school or choose to defer payments. In contrast, federal subsidized loans are the exception where the government pays the interest during certain periods, such as while you’re in school at least half-time. Since private loans don’t offer that subsidy, they’re considered unsubsidized. There can be occasional promotional terms (like temporary 0% interest periods), but those aren’t government subsidies and don’t change the general pattern.