Federal Stafford loan is one of the federal student loans available to most students attending United States colleges or universities. This loan supplements other tuition including funds received from scholarships, grants and personal investment. Stafford loans may be one of the best choices for your needs. They are one of the most commonly used college loan options available.
Stafford loans are available to most students. There is no consideration of credit scores or academic record when obtaining these loans. However, students must:
There are two types of Stafford loans: subsidized and unsubsidized. A subsidized Stafford loan is often the best option for students since it offers a low fixed interest rate of and no payments or interest accumulation on borrowed funds while you are in school. These funds are based on financial need; You can borrow less. Once you reach the cap on how much you can borrow in subsidized funds, you can then utilize unsubsidized loans.
An unsubsidized Stafford loan has a higher interest rate and interest will accrue from the issuance of the funds. You do not have to pay the interest while you are in school, but it begins to accumulate at that time. You can borrow more unsubsidized funds for your education.
There are borrowing limits associated with this federal student loan program. This is broken down based on whether the student is a dependent student (with their parent's aid) or an independent student. For dependent students, the following limits are currently in place:
For independent students, the following limits are in place:
Stafford loan fees consist of a 3% origination fee and a 1% default fee. However, starting July 1, 2016, the origination fee was set to drop 0.5% every year and will gradually be phased out. Currently, from July 1, 2019 to June 30, 2020, the origination fee is 0.5%. The 1% default fee is mandatory since July 1, 2016. These fees will be deducted from the loan amount.
Funds are disbursed directly to the school you have applied through two times per year. Half of the amount issued is disbursed at the start of each semester. These funds are first used to cover fees such as tuition, room and board and other fees. Any excess funds may be disbursed to you to cover other school related costs or may be held by the school to apply to a later enrollment.
Students do not have to begin repayment of the borrowed funds until after the student has graduated or the student’s enrollment is no longer at least half time. After that time, students have a six-month grace period during which no payment is necessary.
Prior to selecting this or any other loan, parents and students should consider scholarships and grants since no repayment is necessary. When free money options are not enough, federal Stafford loans may be a good option. However, they can be costly. Any Stafford loan over $30,000 has a ten-year repayment period during which interest builds. Monthly payments will continue throughout the repayment period until the balance is paid in full. You can repay your debt faster without penalty. You must repay this federal loan; not even bankruptcy can release this responsibility.
For many students, these loans do not provide enough money to cover all tuition and expenses. In these situations, consider Federal Plus loans and private sector loans for education.
To apply for Stafford loans, contact your school financial aid office or visit fafsa.ed.gov to apply online. Federal student loans like the Stafford loans can make paying for school affordable.