Subsidized Federal Direct Loans are awarded based on financial need. The government will pay the interest while you are in school at least half time, as well as during the six-month grace and any deferment periods. Therefore, no interest is accruing on the loan during this time.

Unsubsidized Federal Direct Loans are a non-need based form of aid. Although the interest rate on these loans is set by the federal government, therefore keeping it low, borarticleers are responsible for all interest accrued on the loan. Interest payments can be deferred until graduation and will then be capitalized and added to the principal of the loan. To avoid higher payments due to capitalization, you can make interest payments while in school.

Read more at www.studentloans.gov.