FAFSA subsidized vs unsubsidized loans - what's the interest rate difference?

The difference is actually pretty significant! With subsidized loans, the government pays the interest while your son is in school (at least half-time), during the grace period, and during deferment periods. Unsubsidized loans accrue interest from day one - even while he's in school. The interest rate is the same for both types though - for the 2025-2026 academic year, undergraduate loans have a fixed rate of 4.99% for both subsidized and unsubsidized loans. If you need the money, take the subsidized loan first since it's a much better deal. Only take the unsubsidized if you absolutely need it after exhausting scholarships, grants, and the subsidized loan.

accept the subsidized loan first its better cause no interest in school!! unsub starts interest right away even if not paying yet. my daughter has both types

DONT TAKE ANY LOANS IF YOU CAN AVOID IT!!!! These student loan companies are PREDATORY and the government is in on it. My oldest graduated 6 years ago with $65,000 in debt and now owes over $85,000 because of the interest rates!!! They don't tell you that part in the fine print. And even if your kid declares bankruptcy later in life, student loans CANNOT be discharged! They'll follow him until he dies!!!

To answer your specific questions: 1. Subsidized vs. Unsubsidized: The key difference is who pays the interest while your son is in school. With subsidized loans, the government pays it. With unsubsidized, the interest accumulates even while he's in school. 2. Interest rates: Both types have the same fixed interest rate of 4.99% for undergraduate students for the 2025-2026 academic year. These rates are set by federal law and adjust annually. 3. Repayment: Neither loan requires payments while your son is enrolled at least half-time. Repayment typically begins 6 months after graduation or dropping below half-time enrollment. 4. Loan fees: Both have the same origination fee (about 1.057% for 2025-2026). I always recommend accepting subsidized loans first, then unsubsidized only if needed. Just accepting the loans doesn't mean you have to use all of it - you can always return unused portions without penalty within 120 days of disbursement.

My duaghter just went through this last semester. Its confusing but basically the subsidied loan is better bc the govt pays interest while in school. You should check if your son qualifies for any grants too like the Pell Grant which you dont have to pay back. Thats what we did. Call the financial ad office and ask!

I spent THREE WEEKS trying to get through to our financial aid office. Ended up taking a day off work to drive to campus! The whole system is designed to be confusing so they can get away with charging these outrageous interest rates. My advice is to read every single word of the promissory note before signing - there are HIDDEN FEES they never tell you about upfront!!!

If you're having trouble reaching the financial aid office, you might want to try using Claimyr. I was in a similar situation trying to reach the Federal Student Aid people about my daughter's SAI calculation, and it was impossible. I tried Claimyr (claimyr.com) and they got me connected to an actual person at the FSA in about 10 minutes. They have a video showing how it works here: https://youtu.be/TbC8dZQWYNQ It was seriously worth it after spending days trying to get through on my own. The agent I spoke with was able to explain all the different loan types and interest rates for our situation.

One more thing I forgot to mention - both subsidized and unsubsidized loans have annual and aggregate limits. Subsidized loans are more limited (usually max of $3,500-$5,500 per year depending on grade level). This is why they often offer both types in a package. And don't feel bad about being confused - the financial aid system is incredibly complex by design. Most parents I work with (I'm a college counselor) feel overwhelmed at first.

oh and watch out for Parent PLUS loans thats different!!! thats where YOU borrow not your kid. interest is higher like 7.8% i think

Sounds like you've gotten some good advice here. Just to summarize the key points: 1. Take subsidized loans first (no interest while in school) 2. Only take unsubsidized if absolutely necessary 3. Current interest rate is 4.99% fixed for both types 4. No payments required until 6 months after graduation For your financial planning, you can use the Loan Simulator tool on studentaid.gov to estimate monthly payments based on different loan amounts. This can help you determine how much is reasonable to borrow.

As someone who just went through this process with my daughter last year, I wanted to add that you should also look into work-study opportunities if they were offered in the financial aid package. My daughter got $2,000 in work-study which helped reduce how much we needed to borrow. Also, some schools have emergency grants or additional scholarships that aren't widely advertised - it's worth asking the financial aid office about when you do get through to them. The subsidized loan is definitely the way to go first, and remember you can always decline part of the loans later if you find other funding sources!

I'm a first-generation college student who just went through this same confusion last year! One thing that really helped me was creating a simple spreadsheet to compare the total cost over time. For the subsidized loan, you'll pay back exactly what you borrowed plus interest that starts accruing after graduation. For unsubsidized, you'll pay back what you borrowed PLUS all the interest that builds up during the 4+ years of school. For example, if you take that $3,000 unsubsidized loan now, by the time your son graduates, it could be around $3,600-$3,700 due to compound interest (assuming 4.99% rate). That extra $600-700 might not sound like much, but it adds up! Also, I'd recommend having your son apply for small local scholarships throughout the year - even $500 here and there can really help reduce how much you need to borrow. Good luck navigating this process!

I've been working in financial aid for over 15 years and want to add a few practical tips for your situation. First, you can actually accept the loans now but only request disbursement of what you actually need each semester - this gives you flexibility. Second, many schools will let you decline or reduce loan amounts up until the disbursement date, so you're not locked in immediately after accepting. One thing I always tell parents is to calculate the total borrowing across all four years. If your son needs $7,250 in loans this year, that's potentially $29,000+ over four years just for federal loans (not counting interest). Make sure you're comfortable with that total debt load for his intended career path. Also, I'd strongly recommend setting up FSA ID accounts for both you and your son if you haven't already - this will make future FAFSA renewals and loan management much easier. And definitely explore payment plan options with the bursar's office, which can sometimes reduce how much you need to borrow each semester.

I'm a financial aid advisor and wanted to add something that might help with your decision timeline. Most schools have a deadline for accepting/declining financial aid (usually around May 1st for fall enrollment), but you can often request changes after that date if your financial situation changes. Also, since you mentioned being a single parent, make sure you're aware of some additional resources: many states have grant programs specifically for single parents pursuing education for their children, and some schools have emergency aid funds for families facing unexpected financial hardship. It might be worth asking the financial aid office about these when you do connect with them. One last tip - if your son is considering any summer employment, having him save even a small amount toward his education expenses can reduce future borrowing needs. Every little bit helps when you're looking at the long-term debt picture!

Just wanted to chime in as another parent who went through this exact same confusion last year! Reading through all these responses brought back memories of how overwhelmed I felt with my daughter's first financial aid package. One thing that really helped us was creating a simple comparison chart showing what each loan would cost over the full repayment period. For that $3,000 unsubsidized loan, by the time she graduates and starts the 10-year repayment, we calculated it would cost about $4,200 total versus the $4,250 subsidized loan costing exactly $4,250 (since no interest accrues during school). That extra $700+ really puts the "free" interest benefit of subsidized loans into perspective! Also, don't stress too much about the decision timeline - you have more flexibility than you think. We initially accepted both loans but ended up only using the subsidized portion after my daughter got a small scholarship in her second semester. The school was very accommodating about adjusting the loan amounts. You're doing great by asking these questions and getting informed before making decisions. Your son is lucky to have a parent who cares enough to research all the options thoroughly!

I'm a junior studying finance and went through this same process with my parents two years ago! One thing I wish someone had told us earlier is that you can actually view your loan servicer information and track interest accrual in real-time through your FSA account once the loans are disbursed. For the unsubsidized loan, I was shocked to see how quickly the interest adds up - even though it's the same 4.99% rate, watching it compound daily while I'm in classes really motivated me to make small interest payments when I can (like $20-30 from my part-time job). You're not required to make payments while in school, but even tiny payments toward the interest can save you hundreds over the life of the loan. Also, if your son is planning to go to graduate school eventually, be aware that subsidized loans are much more limited for grad students, so taking advantage of them now while he can get them is smart. The borrowing limits increase each year too - freshman can only get $3,500 subsidized vs $5,500 for juniors/seniors. Hope this helps from a student perspective! The learning curve is steep but you'll get through it.