An unsubsidized loan is a Federal Direct student loan that has no interest paid on your behalf. Federal Direct student loans charge a fixed interest rate and a small fee for the money that is borrowed for both parents and students. The interest charges for student loans accrue on a daily basis using a simple interest formula. Students that demonstrate a higher level of financial need may qualify to have the interest rate paid for (subsidized) by the government during the in-school deferment and grace periods. However, a majority of borrowers will not qualify and are responsible to pay the interest that accrues in additional to the principal amount borrowed and this is the basis for an unsubsidized loan.