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Stafford Loans are the most popular federal education loan programs in the US, which are available to both graduate and undergraduate students at a very low interest rate. Essentially guaranteed or insured by the federal government, Stafford Loans, or Direct and FFEL (Federal Family Education Loan), are either subsidized or unsubsidized. A student can receive subsidized loan and an unsubsidized loan for the same enrollment period.
Subsidized vs. Unsubsidized Stafford Loans
Federal subsidized Stafford Loan and Federal unsubsidized Stafford Loan are the two types of Stafford Loans, for which students can be eligible for one or both loans depending on their house hold income.
A student is awarded with a subsidized loan on the basis of financial need. The interesting aspect of this education loan is that students are not charged any interest before they start repayment or during authorized periods of deferment. During these periods, the federal government ?subsidizes? the interest.
An unsubsidized loan, on the other hand, is not awarded on the basis of financial need, and students charged interest from the time the loan funds are disbursed until they are paid in full.
Borrowing Limits
Borrowing limits or loan amounts may vary depending on a students? year in school, and their financial dependence and independence. The schoolīs financial aid will determine a studentīs eligibility for a subsidized or unsubsidized loan.
In the first year, students may borrow a maximum of $2,625.In the second year, they can borrow an additional amount of $3,500, while juniors and seniors may borrow $5,500 each year. Graduate and professional students may borrow $8,500 per year under the Federal subsidized Stafford Loan.
Federal unsubsidized Stafford Loan is also available to every student, regardless of his or her income. A student can borrow an unsubsidized Stafford Loan as long as he or she is a U.S. citizen or eligible non-citizen, is enrolled at least half-time at a school, the student does not have a drug offense, has not defaulted on a previous educational loan, and does not owe a repayment on a federal grant, and the studentīs making satisfactory academic progress.
Accepting Stafford Loan
The loan funds are sent directly to schools, which are disbursed in at least two installments, and no installment will be larger than half the amount of the awarded loan. First of all, the loan money should be used to pay for tuition fees, and room and board. A student will receive the remaining loan funds by check or in cash, unless students give the school written permission to hold the loan funds until later in the enrollment period.
A first-year undergraduate student and a first-time borrower canīt get the first disbursement of loan until 30 days after the first day of enrollment period.
Pay back Stafford loan
Students have six months (e.g. grace period) before they actually begin repayment after completion of a graduate program, school leaving, or drop below half time enrollment. During the grace period on a subsidized loan, students donīt have to pay any principal, and interest wonīt be charged. During the grace period on an unsubsidized loan, students donīt have to pay any principal, but interest will be charged. They can either pay the interest or it will be capitalized.
We must say that Stafford Loans are the most popular cost-effective source of education funds!
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