What is a subsidized loan?

A subsidized loan is one in which the borrower receives assistance from another party, such as a government organization or a charity. Two common types of subsidized loans are student loans and mortgages.

For example, a Stafford Loan is a type of student loan in which the U.S. government pays the interest if a student meets certain criteria, such as being a U.S. citizen enrolled in school at least half-time. Various subsidized first-time home buyer loans offer perks to buyers such as a low down payment, help with interest or grants for closing costs or home improvements. To qualify for a subsidized loan, borrowers must meet certain income requirements.