Which Loans to Pay Back First: Subsidized or Unsubsidized?

Hi! So, I have both subsidized and unsubsidized student loans. When it comes to paying them back post-graduation, does it matter which type I pay off first? Any advice would be awesome!

It's a good question to consider when planning your loan repayment strategy. The main difference between subsidized and unsubsidized loans is that the interest on subsidized loans does not accrue while you're in school or during other deferment periods, while the interest on unsubsidized loans begins to accumulate as soon as you take out the loan.

Given this difference, it's generally recommended to pay off your unsubsidized loans first. This is because the interest on unsubsidized loans has been accruing since you took out the loan, so there's likely a larger interest balance on those loans compared to your subsidized loans. By tackling the unsubsidized loans first, you'll be able to save more on overall interest payments in the long run.

However, it's important to also consider other factors like interest rates and your overall financial situation when deciding on a repayment strategy. If the interest rates on your loans are significantly different, you may want to pay off the loan with the highest interest rate first, regardless of whether it's subsidized or unsubsidized. This approach is known as the debt avalanche strategy, which can also help minimize interest payments over time. Alternatively, you can also consider the debt snowball strategy, which entails paying off the smallest loans first to build momentum and motivation.

Ultimately, the best strategy for you will depend on your individual circumstances, but paying off unsubsidized loans first can be a good starting point. Be sure to also explore your loan repayment options and consider making a plan that factors in your other financial goals and necessities.