Federal Stafford Loan
Today going to college requires money. In fact college costs a lot of money. Most families do not have the financial resources to pay for the college expenses of their son or daughter.
Students entering college have many sources of money to help fund their college education. They have their own personal and family’s financial resources, scholarships and grants. Even with all of these sources combined there still is a shortfall. This is where a Federal Stafford Loan can supplement or fill in the funding gap to pay for college.
A federal Stafford loan is available to nearly all students regardless of credit. The fact credit does not exclude a student from receiving a federal Stafford loan is a great benefit.
There are two different types of federal Stafford loans: Subsidized and Unsubsidized Loans.
Benefits of a Subsidized Federal Stafford Loan
#1 No payments are required while the student is enrolled in college or in deferment. With no payments the student can concentrate on college and not worry about earning money to make loan payments.
#2 Low fixed interest rate. Rates can be as low as 4.5%. The interest rate on the loan is large factor in the cost of the loan once you have to start making payments.
#3 No interest while enrolled in college or in deferment. Not having interest charged while in college is a great benefit to anyone who qualifies for a subsidized loan.
#4 You currently do not have any federal student loans in default. The default means the loan is not behind in payments or in collections.
To recap why a subsidized federal Stafford loan is a great option: A low interest rate, no payments while in college and no interest accumulating while you the student is enrolled in college.
Benefits of Unsubsidized Federal Stafford Loan
#1 You have increased loan limits of up to $12,000 per year depending on degree and status in college.
#2 Fixed rate currently at 6.8%.
#3 No payments are required while enrolled in college. Interest is accruing on the balance of the loan.
One important note you need to consider with an unsubsidized federal Stafford loan is the interest starts accruing after the funds are dispersed to the college. This is one reason you want to make some type of monthly payment because you do not want interest building up on top of the amount borrowed.
Importance of Making at Least Interest Payments
For example you borrowed $10,000 at the 6.8% interest rate. Over four years without any payment the $10,000 balance would grow to over $13,000.
After looking at these two Stafford loan options I’m sure you like the subsidized federal Stafford loan over the unsubsidized loan. The question is are you eligible for the subsidized loan?
How To Qualify for A Stafford Loan
#1 To qualify for a subsidized federal Stafford loan you must to be a U.S. citizen or eligible non-citizen.
#2 You must have completed your Federal financial aid application commonly known as the FAFSA. This is the most important financial aid form you can complete to pay for your college. The FAFSA form will access how much of a federal Stafford loan you may receive.
#3 You must be enrolled in half time or full-time in an accredited college program. This is a mistake many people make when they decide to take off a year and then come back to college.
#4 You have completed high school or have a GED
Just because you qualify for a subsidized loan doesn’t necessary mean you will receive a federal Stafford loan. Your FAFSA is reviewed by the Department of Education to determine your eligibility for a subsidized federal Stafford loan and the amount you can borrow.
Is College a Worthwhile Expense/ Investment
Attending and paying for a college education is one of the most expensive items you will ever purchase. Today someone can expect to pay over $65,000 for tuition and room and board to attend a public university.
Finding alternative sources to fund your college education can be a challenge. A federal Stafford loan can help meet the funding challenge.
College is still a great investment in yourself or your child regardless of the cost. With a subsidized federal Stafford loan you do not have to make loan payments and accrue interest while in college. This benefit makes the loans very appealing to most families.
It is important to look at all the funding options available for your child. Everyone has his or her own unique financial situation. Take the time to see how a federal Stafford loan can help you accomplish your college dream.