All About Stafford Loans
Student Guide to the Perfect Student Loan
Any student loan is a serious undertaking and should not be entered into lightly. You are agreeing to accept financial aid for your college tuition under contract to repay said loan in accordance with the provisions established by the loan officer. No loan is perfect, but the Federal Stafford Loan comes pretty close. Stafford Loans are the most common form of Federal financial assistance to students seeking to further their secondary education.
Features of the Stafford Loan:
- Low interest
- Easy to qualify
- Undergraduate and graduate students may qualify
- Government pays the interest on subsidized Stafford loans while student is in school
- Students qualify for higher annual limits each year
- No credit check required
- Six-month grace period following graduation
What is the Stafford Loan?
Stafford Loans are government guaranteed student loans offered to qualifying students currently enrolled in an accredited college or university. These loans are made available through the Federal Direct Student Loan Program or through a private lender that participates in the Federal Family Education Loan Program (FFEL). Federal Stafford Loans are designed to enable students from all backgrounds access to low interest student loans in order to pursue their post secondary education.
Types of Stafford Loans:
- The Subsidized Stafford Loan is a need based low interest student loan that is guaranteed by the US Federal government. Interest on this student loan is paid by the government for as long as the student remains enrolled in an accredited university or college. A six month grace period following graduation or cessation of classes is granted to allow the student time to enter the workforce and make suitable arrangements to fulfill their payment obligations.
- The Unsubsidized Stafford Loan is not awarded on the basis of financial need and is available to many more students than the subsidized loan. Student borrowers are responsible for all accrued interest as soon as the loan nhas been disbursed, but may opt to defer these payments until after graduation. The unsubsidized Stafford Loan allows for a six month grace period following graduation before the borrower must begin repayment in accordance with the agreed terms of the original promissory note.
Stafford Loan Interest Rates and Fees
All Stafford Loans originating prior to June 30, 2006 have a variable interest rate adjusted annually and capped at 8.25%. Stafford Loans originating after July 1, 2006 and prior to July 1, 2011 have interest rates that are fixed at 6.8 %.
Subsidized Stafford Loans for undergraduate students granted between July 1, 2011 and June 30, 2012 will have fixed interest rates of 3.4%. For graduate and professional degree seeking students that fixed rate rises to 6.8%.
Unsubsidized Stafford Loans currently have a fixed interest rate of 6.8% for all student borrowers whether they are enrolled in undergraduate, graduate or professional degree seeking programs.
Stafford Loans, as guaranteed by the Federal government, remain one of the safest, most beneficial and lowest impact student loans available.
Qualifications for a Stafford Loan
The first step towards qualifying for a Federal Direct Stafford Loan is to fill out and submit the Free Application for Federal Student Aid, or FAFSA. Most students will qualify for some form of financial aid but until you submit your FAFSA you will never know what is available to you. Stafford Loans are the most common financial aid available to students entering college and nearly every applicant is eligible for either a subsidized or unsubsidized loan package.
Basic eligibility requirements for the Stafford Loan include:
- Student must be a U.S. Citizen, permanent resident or eligible non-citizen
- Student must complete and submit the FAFSA before the annual deadline
- Student must be enrolled at least half-time in an accredited college
- Student must not be in default on any other education loan
To qualify for a subsidized Stafford Loan student must meet the income requirements for need based aid.
Applying for a Stafford Loan
You must complete a FAFSA to qualify for any type of Stafford Loan. Students are notified if they are approved for need-based subsidized Stafford Loan funds. You are free to apply for unsubsidized Stafford Loan funds over and above any subsidized funds for which you've been approved.
Once you choose a student loan lender you will complete the Master Promissory Note for the Stafford Loan. This document details all the fine print of the loan, including your repayment responsibilities and terms.
Repayment of Stafford Loans
For both subsidized and unsubsidized Stafford Loans you have a standard 6-month grace period before you must begin repayment. During this time you are given information on repayment and reminded of loan terms and details of your payment schedule.
If at any time you have problems repaying a Federal student loan, you may apply for a Special Direct Consolidation Loan. Special Direct Consolidation Loans are designed to help borrowers manage their debt by placing all of their loans with one lender and reducing their payments to one manageable monthly bill.
Stafford Loans are the most common and most affordable student loans you can find in today's lending market. Government regulation makes these loans safe as well as dependable and help to give students from all walks of life the opportunity to realize their potential by attending college of university.
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