Stafford Loan – Federal Loan for Education

It is commonly seen that cost of education rises with the level of education from school to undergraduate, graduate and post graduate. Most students seek various avenues like scholarships, grants and financial aids to support the high cost of their education. If these do not work or are not sufficient, they knock on the doors of federal student loan to acquire monetary assistance for their education. Of the various types of federal student loans designed to suit different needs, Stafford Loan is very popular among the students. A Stafford Loan helps students with their tuition fees and other educational expenses. This loan was previously known as Federal Guaranteed Student loan but in 1988 it was named in honor of U.S. Senator Robert Stafford as Stafford Student Loan Program. Popularly known a Stafford Loan, it provides loans to undergraduate, graduate or professional students at a fixed, low rate of interest. They can be obtained from credit union, bank or from the government and are regulated by federal government. They can be classified as– • Subsidized Stafford Loans – In a subsidized Stafford loan, while the student is in school the interest is paid by the government. Even during the authorized deferment period and during the grace period, the interest is paid by government. The student needs to be enrolled in a school for atleast half time (6 credit hours) and if he drops out of school then he becomes responsible for the monthly repayment. • Unsubsidized Stafford Loans – In an unsubsidized loan, government does not pay the interest and entire repayment is done by the borrower. To become eligible for a Stafford Loan, whether subsidized or unsubsidized, the person must submit the FAFSA (Free Application for Federal Student Aid) application. The student must also be enrolled in an undergraduate or graduate course atleast on a half-time basis. The type of loan for which a person qualifies depends on his financial/dependency status and EFC (Expected Family Contribution). Interest rate is fixed for Stafford Loan and is 3.4% for subsidized loans and 6.8% for unsubsidized. Repayment of Stafford Loan begins after a grace period of six months after graduation or termination of the study program (whichever is first). There is no need for credit approval and can be consolidated later. But Stafford loan follows increasing borrowing limits and one cannot access the entire loan amount at once. Depending on the status of the degree and how far person is in school (number of years) a person can access the loan for example, undergraduates can take an amount of $5500 in first year,$6500 in second and $7500 each year until they reach $31000. The limits are separate for dependent undergraduate students, independent undergraduate, professional and graduate students. The benefits of Stafford Loans make it a popular and lucrative option to secure low cost financial aid to support one’s education. These loans are student’s first choice in federal loans and have earned the reputation of making college payments easier. Read More...