A Direct Subsidized Loan is a type of federal student loan available to eligible undergraduate students who demonstrate financial need. The U.S. Department of Education pays the interest on this loan while the student is in school at least half-time, during the grace period, and during deferment periods. This helps reduce the overall cost of borrowing. To qualify for a Direct Subsidized Loan, students must complete the Free Application for Federal Student Aid (FAFSA). The amount a student can borrow depends on their year in school and financial need, with limits set by the federal government.