Stafford loans are one of the many types of loans available to students that can be used to fund their education. Stafford loans are available for both undergraduate and graduate students, and are received at a fixed interest rate. Students applying for Stafford loans must be attending school on a half-time or greater basis.
The Stafford loan is one of the many that is supplied by the federal government, so a FAFSA must be filled out in order to be eligible. The FAFSA is the Free Application for Federal Student Aid. Stafford loans don’t have to be paid back while you’re in school and you are not accepted or declined a loan based on your credit score. There are deadlines for completing your FAFSA that need to be followed. Through the FAFSA, if you receive a Stafford loan, you can choose to have your information sent directly to any number of schools you’re considering.
Your Stafford loan will be either subsidized by the government or unsubsidized. Subsidized loans have the interest paid by the U.S. government as long as the student is in school. Unsubsidized loans are not based on need, and the interest accumulates while the student is in school, with repayment beginning six months following graduation.
- No repayment while in school as long as half-time status is maintained
- Loan eligibility not based on credit standing
- Available for both undergraduate and graduate students
- Interest rates are low
- Borrowing limits have increased recently
- Apply for several loans with one FAFSA
- Loan can be used at school of choice
- Repayment begins six months after graduation, or immediately upon student leaving school
- Loans must be repaid even if you don’t graduate
- Fairly easy for young students to receive large amounts of money that has to be repaid
- Many students are not properly educated on managing funds before receiving them
Stafford loans have lower interest rates than a typical bank loan, but the actual amount you repay will depend on your individual loan amount. The interest rates are as follows for the next couple of years (as of July 2010):
- Academic year 2010-11: 4.5% subsidized; 6.8% unsubsidized
- Academic year 2011-12: 3.4% subsidized; 6.8% unsubsidized
- Academic year 2012-13: 6.8% subsidized; 6.8% unsubsidized
Paying for education is expensive. Borrowing against that education doesn’t always work out the best. For instance if students decide they don’t want to finish college or aren’t able to get a high enough paying job after graduating, paying back the loans can be very difficult. Stafford loans are available to help ensure that students who want to go to college can receive the education they desire without fronting the expenses. The important thing to remember is to only take the amount of money you need, not the full amount offered, and have a plan for repaying the loans when they are due.
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