Subsidized vs. unsubsidized loans: what's the difference?

Hi everyone! I'm diving into the financial aid process and came across 'subsidized' and 'unsubsidized' loans. Can someone explain the difference, and maybe some tips on which one is more beneficial to take out?

Hey there! I’m glad you’re taking the time to understand the financial aid process – it's super important. The main difference between subsidized and unsubsidized loans is the interest accrual.

With subsidized loans, the government covers the interest while you're in school at least half-time, during the grace period, and during any deferment periods. This means the loan doesn't gain interest during those times, which can save you money in the long run.

Unsubsidized loans, on the other hand, start accruing interest as soon as they're disbursed, even while you're in school.

As for which is more beneficial, it usually goes like this: if you’re eligible for subsidized loans (which is need-based), they're typically the better choice because of the interest savings. Yet, you'll often find that you might need to take out a combination of both to cover your costs. Remember, it's key to borrow only what you need and to read up on the repayment terms of each loan. If you haven't already, chatting with the financial aid office at your school can provide you with specific guidance based on your situation. Good luck with your studies!