Stafford Loans - an Overview

By: Gary Marjani

The Stafford Loan is one of the most well-known, popular student loans available today. There are both subsidized Stafford Loans and unsubsidized Stafford loans available, from a variety of lenders. Before a student decides what kind of Stafford Loan might be best for him or her, it is first important to know a little bit about Stafford Loans - where they come from, what they are, and what they do.

Stafford Loans have been around for quite a while. Formerly known as the Federal Guaranteed Student Loan, Congress renamed it in 1988, after a senator from Vermont named Robert Stafford, who worked tirelessly for higher education. From there on in, it became known as the Robert T. Stafford Loan - or, more commonly, simply as the Stafford Loan.

Naturally, Stafford loans are student loans. They are offered only to those students who are attending accredited American universities, and they are there to help finance a student's education. Among other things, this loan guarantees that a student will pay back the lender of his or her Stafford Loan even if - and especially - if he or she defaults.

Stafford Loans are guaranteed by the government of the United States. As such, the interest rates for Stafford Loans are significantly lower than those offered by private loans. Perhaps to balance the low interest rates, Stafford Loans come only with very strict requirements for a student's eligibility. As well, there are often strict limitations on the amount a student can receive from a Stafford Loan.

Before ever applying for a Stafford Loan, a student must completely the FAFSA - Free Application for Federal Student Aid - form. Students can receive Stafford Loans a number of ways, including getting them through the Federal Direct Student Loan Program, or as private loans, through the Federal Family Education Loan Program.

Stafford Loans employ what is known as an in-school deferment. This means that students receiving a Stafford Loan are not required to pay the loan back as long as they are attending college. It does not matter whether they are full-time students or part-time students. In addition to that, students have a grace period - generally lasting six months - following their graduations from college, during which they are not required to pay back their Stafford Loans. This also applies if a student is forced to fall below part-time status or to withdraw from school altogether.

Stafford Loans can come in two different forms: as subsidized loans and as unsubsidized loans. With a subsidized Stafford Loan, the government covers the interest while a student is attending college, during the grace period following graduation, and during any approved deferments - such as an unemployment deferral. Furthermore, the amount of a subsidized Stafford Loan depends solely on how much financial aid a student needs.

When a student has an unsubsidized Stafford Loan, he or she must pay all the interest for their loan while they are attending school. While this interest can also be deferred while the student is in college, it is added onto the loan principal, to be paid later.

This is merely a glance at Stafford Loans, known for their fairness when it comes to interest rates. Despite their strict eligibility requirements, it is fairly easy to qualify for a Stafford Loan, thanks in part to Robert Stafford's strong interest in helping students who wish to further their educations.

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