Create your first path. Click on the "Subtract from path area" button. Draw your second interior path. Finally, load the path as a selection.
Can I use what I have somehow, or do I need to start over?
Tried that but still the same result. The hole is not subracted.
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Here's the problem with working with paths in Photoshop: the stacking of the shapes inside the path is very important but you can't easily change that.
The uppermost shape interacts with all the shapes beneath it acording to the settings in the Options bar, if you want to rearange them you will have to select the path you want to bring to the front, Cut it and then Paste it back in place. You won't notice any difference on screen but now the path you just pasted is at the top of the stack
So if you first make a large circle and then you make a small circle in the middle of it, to cut out the small circle from the large one you have to select the small circle and from the options bar select Subtract from Shape area because the small circle is at the top. But if you first make the small circle and then the large one and want to achieve the same result then you have to select the large circle and select Exclude from Shape area. Or of course cut/paste the small circle so that it's at the top of the stack and then with it selected chose Subtract from Shape area
The information on changing path stacking order is useful. Thanks !