subsidized vs unsubsidized loans

[RESmonkey]

Err...so I have to choose my financial aid package (first time college goer here).

Should I be the one taking a subsidized loan, or should my parents? (my parents are foreign, they have no idea how this stuff works. i gotta figure it out).


There's an option to work and study at the same time, but I don't want to work and study (going to be a bit hard from people I hear). Should I just take the remaining amount after scholarships as a subsidized loan (about $3810)?

What's better, sub or unsubsidized? When do you pay the sub? After 1 year, or all 4 years of undergrad?


Thanks ATOT

 

[Journer]

STUDENT LOAAAAAAAAAAAAAAAAAAAAAAAAAAAAANS!

 

[pontifex]

subsized is better but i forget why. something like the government pays for part of it or you don't have to pay interest or something like that.




Subsidized vs. unsubsidized loans
If you are awarded a loan as part of your financial aid package, you may be eligible for either subsidized or unsubsidized funds, or a combination of both. The big difference between the two is when the interest begins to accrue.

Subsidized loans are awarded on the basis of financial need. You won't be charged any interest before you begin repaying the loan because the federal government subsidizes the interest during this time.

Unsubsidized loans charge interest from the time the money is first disbursed until it is paid in full. The interest is capitalized, meaning that you pay interest on any interest that has already accrued. One way to minimize how much interest accrues is to pay the interest as it accumulates.

 

[RESmonkey]

Originally posted by: Journer
STUDENT LOAAAAAAAAAAAAAAAAAAAAAAAAAAAAANS!

These are student loans. Gov't educational loans, and subsidized.

 

[Dirigible]

If you have a choice, subsidized are better. You basically get free money while you're in school. The interest doesn't start to add up until after you're out.

From your point of view, it'd be better if your parents took out the loans. From their point of view, better if you did. It's your education, so you should really take out the loans.

Edit: Oh, and the work-study is definitely doable while in school. If it'll keep your student debt down, I'd recommend it.

 

[RESmonkey]

I thought so. I don't want to have them pay for me anymore; they've paid for me all these 18 years

So I'm guessing once I'm done with undergrad I'll be about 18-20k in sub.loan debt. Assuming I'm going for masters or w/e, that is a small amount, no?

 

[FDF12389]

Why would your parents take out your loans?

 

[RESmonkey]

Because there are two things listed: Student and Parent PLUS. No info on what I'm supposed to pick or anything.

 

[Dirigible]

Originally posted by: RESmonkey
I thought so. I don't want to have them pay for me anymore; they've paid for me all these 18 years

So I'm guessing once I'm done with undergrad I'll be about 18-20k in sub.loan debt. Assuming I'm going for masters or w/e, that is a small amount, no?

People generally don't think ahead to compare how much they'll earn after being out of school to how much their student loan payments will be. I don't know if $18-20k in student loans is a small amount in your case. You should be able to figure that out, though.

 

[Dirigible]

Originally posted by: RESmonkey
Because there are two things listed: Student and Parent PLUS. No info on what I'm supposed to pick or anything.

PLUS loans, IIRC (and I may not, it's been over a decade since I've been in school), are non-government sponsored loans. They have worse rates than the government sponsored subsidized and unsubsidized loans. Basically, people took out PLUS loans after they'd hit their limits on the subsidized/unsubsidized loans.

 

[RESmonkey]

Hmm...it seems I must register for both loans (just to be eligible to receive them, not taking any yet), student and Parent PLUS.

 

[RESmonkey]

Originally posted by: Dirigible

Originally posted by: RESmonkey
Because there are two things listed: Student and Parent PLUS. No info on what I'm supposed to pick or anything.

PLUS loans, IIRC (and I may not, it's been over a decade since I've been in school), are non-government sponsored loans. They have worse rates than the government sponsored subsidized and unsubsidized loans. Basically, people took out PLUS loans after they'd hit their limits on the subsidized/unsubsidized loans.

I see. That's why only subsidized show up on my package. The instructions do list PLUS loans, but I"m guessing this is only so I can get eligible for them if I ever need them?

 

[DaWhim]

is there even a contest for this?

subsidized loan = gov't pays your interests while you are in school or in deferred status.
unsubsidized loan = interest will be incurring doesn't matter where you are. if you don't pay the interest part monthly, it will capitalized (add to principle).

IMHO, take as much subsidized loan as you can, either you need it or you don't. I did that and I parked some of them in the bank (in case for emergency).

 

[Dirigible]

Originally posted by: DaWhim
is there even a contest for this?

subsidized loan = gov't pays your interests while you are in school or in deferred status.
unsubsidized loan = interest will be incurring doesn't matter where you are. if you don't pay the interest part monthly, it will capitalized (add to principle).

IMHO, take as much subsidized loan as you can, either you need it or you don't. I did that and I parked some of them in the bank (in case for emergency).

Good point. If you have good self-control, take as much in subsidized loans as you can. Park the excess in a CD or other insured interest-bearing account. Pay back before any interest on the loan accrues. Keep the interest you earned with your free money while you were in school. Do not go crazy and spend this money - paying back student loans sucks. Live frugally until you're earning.

 

[RESmonkey]

^ Thanks guys. I'll post back if I have any more q's.