Top 3 Questions and Answers About Subsidized vs. Unsubsidized Loans from Reddit

If you’re applying for student loans for the first time, you may be confused about the difference between subsidized and unsubsidized loans. There’s major differences between the two, and understanding these differences can help you save thousands of dollars. We’ve compiled a list of questions and answers from subsidized vs unsubsidized student loans reddit threads. All posts and comments are written by real people with real student loan experiences. Read on to understand what subsidized and unsubsidized loans are, how they differ, and when to repay them. 

1. What is the difference between subsidized and unsubsidized student loans?

If you qualify for both subsidized and unsubsidized student loans, you may be confused about what some of the major differences are. Subsidized and unsubsidized student loans are both options provided by the federal government, but they have different eligibility criteria, interest accumulation policies, and more. In this subsidized vs unsubsidized student loans reddit comment thread, users outlined and explained what some of these key differences actually are.

The top upvoted comment, from reddit user kouhoutek, reads “A subsidized loan is where someone else, usually the government, is paying the interest for a while. In the case of a student loan, it means you don't accumulate interest on the money you borrowed. You borrow $50K, you owe $50K when you graduate. With an unsubsidized student loan, you usually don't have to make payments while you are a student, but interest still accumulates and compounds. So that same $50K, you might owe $60K by the time you graduate. So obviously you want a subsidized loan. However, they are need based, which means your parent's income often gets figured into it, and harder to get.”

For subsidized loans, the government will pay the interest on the loan from when you start school to 6-months after you graduate. This 6-month period is the grace period for your loan. After it ends, you’re responsible for paying the interest that accumulates on your loan. 

Read more about the major differences between subsidized and unsubsidized loans here.

2. Which loan should I apply to first?

When you need money for college, deciding on which loans to apply to can be a tough process. When it comes to federal subsidized and unsubsidized loans, reddit users agree that subsidized loans should come first. Then, you should apply for unsubsidized loans if you need more money. This is because, as mentioned before, the interest that accumulates on subsidized loans    while you’re in school and 6-months post graduation is paid for by the federal government. 

In this reddit comment thread, user girl_of_squirrels provided how they believe you should go about applying for loans: “Generally the order you want to go in is to use grants/scholarships first, then federal subsidized loans, then federal unsubsidized loans, then Parent PLUS loans, then private loans.”

Other reddit users agree with this order, often ranking all federal options over private options. However, we here at Juno still think you should consider your private options. Definitely apply for Federal Stafford loans (subsidized and unsubsidized), but if you need more money after reaching the federal lending limit, don’t immediately turn to Parent PLUS loans -- especially if you have good credit. Parent PLUS loans have a high interest rate and origination fee. For Parent PLUS loans disbursed after July 1, 2021 and before July 1, 2022, this interest rate is 6.284%. Some private loans, including our negotiated deal, have much lower starting rates and no fees. 

If you want to compare Parent PLUS loans to your private options, we have a calculator that allows you to do so. You can also read more about Parent PLUS loans here. 

3. Which loan should I repay first?

If you’ve taken out both subsidized and unsubsidized student loans and are currently working to repay them, you may be wondering which loan should take priority. The fastest way to pay them back is to pay off all your loans simultaneously, but that often isn’t a feasible option for people.

This reddit comment thread easily breaks it down. For people with subsidized loans who are still in school or are less than 6-months out post-graduation, the government will continue to pay your interest. As reddit user redditbobby puts it in this subsidized vs unsubsidized reddit thread, “Subsidized means that someone is paying your interest. Likely the government. Which means you'll want to pay the unsubsidized first, since you're paying your own interest there.”

However, if you are not in school and are no longer in the 6-month grace period post-graduation, many reddit users recommend that you start by paying off your loan with the highest interest rate. This allows you to avoid paying higher total interest costs over the lifetime of your loan. 

Read more about how to prioritize your loan payments here. 

Juno can help you to find a student loan or refinance a loan at the most competitive possible rate. We get groups of buyers together and negotiate on their behalf with lenders to save them money on private student loans and private student loan refinance loans. 

Join Juno today to find out more about your options for affordable private student loans to help fund your degree.