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Stafford Student Loans

A Stafford loan is a type of federal student loan that is available to college and university students. It is intended to supplement both personal and family financial resources, as well as grants, scholarships and work study. Stafford student loans are typically available to all students irrespective of credit. These loans can either be subsidized by the US government or unsubsidized, although this will very much depend on the actual student’s need.

Once a student has collected their various scholarships and grants, their next course of action in order to finance their education should be to apply for a Stafford loan. These loans are offered at a fixed rate and are guaranteed by the government. They can be used for various things such as paying for tuition, books, housing and plenty more. There are various benefits of Stafford student loans and they will, without doubt, make paying for college far more affordable.

Possibly the most important benefit of a Stafford student loan is that they are offered at a fixed interest rate. In addition to this no credit check will be made on the student and there is also no requirement to make payments until after graduation. There are increased borrowing limits available with Stafford student loans, which are currently up to $20,500 per year, although this will depend on a student’s degree status and the years that they have been in school.

However, the greatest benefit of Stafford student loans is that their repayment plans are structured to provide flexibility for just about any budget. There are a number of repayment plans to choose from once a student has entered the repayment period:

  • Standard repayment will offer a fixed payment each month that is based on principal and interest.
  • Graduated repayment will offer lower payments at the beginning, and this will gradually increase over time.
  • Income-based repayment will offer monthly payments that are based on a graduate yearly income and the loan amount.
  • Extended repayment is typically offered for loans totalling more than $30,000, and this will provide a graduate a choice of fixed or graduated payments over a maximum term of 25 years.

In order to be eligible for a Stafford loan a student must be a US citizen or national, permanent resident, or eligible non-citizen accepted for enrolment or if a student is attending a particular school that participates in the Federal Family Education Loan Program. In addition to this the student must have submitted their Free Application for Federal student Aid (FAFSA). If a student is specifically looking for a subsidized Stafford loan they must have a financial need that has been determined by the school, and a student must be enrolled or plan to enrol for at least half time.

As mentioned a subsidized Stafford loan will be awarded based on a financial need, and as of the current educational year interest rates will be as low as 3.4%. However, it is important to be aware that no interest will be charged until repayment begins, and therefore the federal government will subsidize (or pay) the interest until this time.

An unsubsidized Stafford loan is not awarded based on a financial need, and therefore any eligible student is able to take out an unsubsidized Stafford loan. Interest is charged on this loan as soon as it is disbursed right up until the time the loan is repaid in full. Unsubsidized Stafford loan rates are currently 6.8%.

The funds from a Stafford loan will be disbursed by the lender directly to the school, and this is typically done in two installments. It is generally sent during the fall and winter semesters. The loan money then can be used to pay for a student’s tuition and fees. If there are any funds left over, the student’s college will usually credit their account or pay the student directly based on the school’s policy.

The amount of money that you can borrow from a Stafford student loan will typically be based on your grade level and of course your status as a student. Therefore, you will generally find that independent students may be eligible to borrow more money, as they are paying for college without any assistance from their parents. A student may not always qualify for the maximum Stafford loan amount, and this will be based on their award letter, and therefore they may need to consider additional loan funding from other sources.

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