Hey guys! So lately I've been seeing a lot of people receiving their financial aid and posting it. A lot of people seem happy about the loans but I wanted to give a quick explanation on Subsidized vs. Unsubsidized Loans because if you don't understand the difference you will have a problem with going in debt thousands of dollars more than you should or need to.
So first of all, interest is a key part of why you have to look at your student loans VERY carefully!
Interest is defined as is payment from a borrower to a lender of an amount above repayment of the principal sum. Basically it is a percentage of the sum you borrow that you have to pay on top of the already borrowed sum of money.
When it comes to Subsidized vs. Unsubsidized Loans this is important, since one of the key differences of the both are related to interest.
A subsidized loan does not accumulate interest while you are still in school. If you borrow $1000 the interest of $10000 won't start being added until after you graduate college. So you will start paying of the loan when it is still at $10000. A subsidized loan is generally a good loan to have if a loan is necessary. It is always better to not have any loans at all though!
On the other hand, a unsubsidized loan accumulated interest while you are in school. This mean that if you borrow $3000 as a freshman in college (the average interest rate is about 4.5%), by the time you graduate you would be paying off another $500- $1000, depending on how soon after graduation you find a good job to begin paying it off. I would not recommend getting a subsidized loan if you can do without. You can always try to at least not the first year so you have less of a build up over the 4 years. It might even be smarter to take out a bank loan since if you have a job (even if it is only part-time) you will be able to start making payments as soon as possible and won't have a build up of thousands of dollars in interest. But be careful with private loans as well! Always go for the lowest interest rate and spend time comparing which on is truly the best! Never take more money than you need!
Check out https://www.nerdwallet.com for more information and for a loan/ interest calculator!
And of course always try to get more scholarships or grants if you can to further reduce any amount you would have to take a loan out for!
Compare what school is cheapest for you! For me a school with a $33,000 tuition ended up the cheapest because of the institutional scholarships, so don't throw out schools that "cost to much" right away because you never know!
