Stafford loans are offered to students in post-secondary education seeking financial aid for their studies. Unlike most other student loans, they are most often put in place under special circumstances: if a student defaults on their loan, the Stafford loan will act as a contingency for their repayment, offering a low-interest alternative. There are, however, strict guidelines to ensure that the loan is not being abused by the lender.
Both subsidized and unsubsidized, Stafford Loans can cater to students who are both in need of financial aid or perhaps some extra finances to comfortably get through college or University. While it is not required that unsubsidized loans be paid during enrollment, interest on them may accrue during this period, so students need to pay close attention. Recently, the Budget Control Act of 2011 got rid of Stafford loans of post-graduate, graduate and professional students, but kept them for regular undergraduate students.
How To Apply
Students must first complete a ‘Free Application for Federal Student Aid (FAFSA), then go through the United States Department of Education by way of The Federal Direct Student Loan Program (FDSLP). Fortunately, there are certain benefits to the Stafford loan that private or even some federal loans may not provide. For example, the loans will never be charged while the lender is a full-time student.
There are many factors that could potentially make you a dependent, allowing you to be eligible for the loan. These include age, type of degree, spousal and parental status, state of domestic living, degree of emancipation, as well as military status. If you were formerly married and are now separated, for example, you may actually be more eligible for Stafford Loans.
To begin your application process, you must head to the Stafford Loans website and go to the ‘Get Started’ menu. From there, you will go through a three-step process through the online hub. First, it will ask you to pick a college or University. This will be the institution to which you are applying or in which you are currently enrolled. Secondly, you must pick from a series of loan options. Do you require a subsidized or unsubsidized loan? What kind of student are you? Do you have any factors from your past that may render you eligible for subsidies? Finally, all you need to do is fill out your information in full and apply. It is a fairly simple process, but make sure that you keep a tab on the loan so as to keep track of your accruing interest.
Now, to figure out the interest rates of your Stafford loan, you must keep track of a couple of things: First, you must keep track of the date that you signed up for it, as well as the date the loan was disbursed. This changes from year to year, but every students within your category (subsidized or unsubsidized) will receive the same rates as you. Interest rates will neither be affected by your employment prospects.
Variable rate loans are set every year on the last Monday of May to be effective on July 1st for the following year. The rates are based on the price of the 91-day Treasury bill, which gets auctioned at a certain interest rate. Using that percentage, they are able to determine what percentage loans should be offered at. However, the use of a variable loan rate has been recently eradicated, as now students with both subsidized and unsubsidized loans will have interest at the fixed rate of 6.80%.