By Christopher
BillSavings.com Brief: If you are going to attend college soon, you will more than likely need a student loan. One of the most popular student loans is the Stafford Loan. This federal loan includes a low interest rate as well as a flexible repayment plan. The Stafford Loan is either subsidized or unsubsidized and is based on financial need.
Now that you or your child has gained acceptance into college, the next step will be devising a plan to pay for it. While the student will have surely searched and applied for scholarships and grants, they will more than likely have to take out student loans to cover the total cost of their education. This is because students not only have the financial responsibility to pay for tuition, books, and lab fees, but must also pay for room, board, as well as entertainment expenses. Depending on the school, a student can spend more than $25,000 a year to attend college. However, thankfully, those who make it through college will typically earn over a million dollars more during their lifetime than someone without a college education will.
The first step you need to take after you gain acceptance into college, is to fill out a Free Application for Federal Student Aid (FAFSA). This form will determine exactly how much a student can receive in federal financial aid. The rest must come from alternative sources such as scholarships, grants, savings, as well as from private student loans. Below are some details regarding one of the most popular student loans, the Federal Stafford Loan.
Eligibility
To receive a Stafford Loan, a student must be a U.S. citizen or national, a U.S. permanent resident, or an eligible non-citizen. In addition, the student must also attend college at least half time in a non-direct lending program that accepts Stafford Loans. Finally, the student must have completed the FAFSA.
Interest rate
The interest rate on Stafford Loans is very affordable. Furthermore, the interest rate will continue to decrease over the next few years. Currently for the 2008-09 academic year the interest rate is 6% for a subsidized Stafford Loan (government pays the interest) and 6.8% for and unsubsidized loan (student pays the interest). Next year, the subsidized rate will decrease to 5.6% and continue to decline with rates of 4.5% for 2010-11 and 3.4% for 2011-12. However, for the 2012-13 academic year, the interest rate will increase to 6.8%. Unsubsidized loans will remain at 6.8% at least until 2012-13. However, besides the interest rate, students will also be responsible to pay for additional fees associated with the Stafford Loans such as a fee paid to the government to help control the interest rate associated with this specific loan. Furthermore, after you graduate and start repaying the loan you will have to pay late fees if you are late sending in your monthly payment.
Loan amount
As with most loans, there are financial limits to how much a student may receive from Stafford Loans. Currently the limit is $5,5000 for the first year of school ($3,500 subsidized/ $2,000 unsubsidized). For the second year, the limit increases to $6,500 ($4,500 subsidized/ $2,000 unsubsidized). The third, fourth, and fifth year (if needed) limit will be $7,500 ($5,500 subsidized/ $2,000 unsubsidized). If the student remains in school to attend a graduate or professional program they can receive up to $20,500 ($8,500 subsidized/ $12,000 unsubsidized).
Repayment
As previously stated, Stafford Loans is relatively flexible in its repayment schedule. After you graduate and or reduce your enrollment hours to less than half time, you will have a six-month grace period where you will not be responsible to pay the principal balance of your loan. However, if you have an unsubsidized loan you will incur interest charges, although you can add these charges to the total amount of the loan and start repayment after the six-month period expires. If a student can prove financial difficulty such as the loss of a job, they may be eligible to receive an extension, though those with an unsubsidized loan will still be responsible for interest charges during their extension. Finally, under a few circumstances, the student might not have to repay the loan at all such as if the school they attend closes. If the student quits school or receives failing grades, they will still have the responsibility of repaying student loans.
8/26/2008
