Need to know what are federal Stafford loans? We have the answers
Stafford or ford student loans (also called William D Ford student loans) refer to loans offered to finance the education of eligible students joining accredited institutions of higher learning. The loan terms are highlighted in the Higher Education Act Of 1965 which guarantees repayment of the amount due to the lender in case a student defaults. Since the loans are guaranteed by full faith in the government of the United States, they are given to students at a lower interest than the student would otherwise get from private loans. On the contrary, Stafford loans come with strict requirements of eligibility and borrowing limits.
How to apply for federal Stafford loans
You can apply for loans at any time during the semester in which you have registered at least six credits. To apply for the loans, you first have to complete the FASFA, and returning students should complete the Renewal FASFA. You will then receive the award letter in your email or from the office of financial assistance of your school. Usually, the letter summarizes the financial aid that is available for you, which includes the direct subsidized loans for eligible candidates and direct unsubsidized loans. Upon receipt of the letter, you will then have to contact your institution’s financial aid office for the student loans and financial aid to be accepted. Finally, you will have to review and sign every paper that is associated with the process, including the Master Promissory Note.
For you to make this application, you need to have enrolled in an institution that is eligible while maintaining satisfactory academic performance. You are also required to be a United States citizen or a permanent resident of the country or one of its qualified territories. Notably, you should not be in default and must not owe any refund on a Title IV loan.
First-time borrowers during or after 1st July, 2013, have limits on the maximum time that they can be issued with subsidized loans. The time limit, however, is not applicable to PLUS loans or Unsubsidized Loans. If you are affected by the limit, it may not be possible to be issued with subsidized loans for over 150 percent the period your program will last. This is usually known as your maximum eligibility period and is based on your program’s length. H2: Breaking down Stafford school loans
For you to apply for Stafford loans for college or any other related federal financial assistance are required first to complete a FAFSA. The loans are available directly from the Department of Education in the form of direct loan program loans. There is usually no principal payments required on the loan while you are in school enrolled for at least half-time, also referred to as in-school deferment. Repayment deferment proceeds for six months after you have graduated, dropped below half-time enrollment or withdrawn. Borrowing limits for Stafford loans vary with an array of factors such as the year in the institution, dependency status, and student status. Dependent students can borrow amounts that may reach a lifetime Stafford loans limits of $31,000, while independent students are allowed loans of up to $57,500.
Interest rates charged on Stafford loans may vary and can be determined according to the date on which the student amount was disbursed. Additionally, the loans may also change with the level of education of the student. However, the rates don’t vary with default risk, and every student receives a similar interest rate irrespective of their future or major employment prospects.
What are unsub Stafford loans?
Also known as direct unsubsidized loans, unsubsidized Stafford school loans can refer to low-cost, fixed-rate student loans offered by the federal government to students in both the graduate and undergraduate levels of education. You do not require a financial need; therefore the loans are also ideal for students from affluent families. The loans have a fixed interest rate (4.45 percent) for undergrads of the 2017-2018 year and a fixed 6.0 percent given to graduate students in the same period. You will also make no payments while enrolled in the institution while enjoying multiple repayment plans such as the income-based plan.
Subsidized vs Unsubsidized Stafford Loans
Lenders offer two types of Stafford loans; subsidized and unsubsidized. With regards to your household income, you may be eligible for either category of loans. Your institution specifies the specific student loan for which you are eligible. Because of the interest rates and the repayment policy, you are advised to begin with carrying out scholarship searches before applying for financial aid Stafford loans. If you cannot entirely fund your university education through scholarships, then you can go for the loan as your first option.
Stafford Loans that are subsidized are usually need-based financial aid. The need can be shown with specific documentation that you submit to your school before the institution determines the amount you are eligible to borrow. The government caters for interest while you are in school, during deferment, as well as during your grace period prior to the commencement of repayment. The government will help you during repayment if you have to defer your amount due at any given time.
Unsub Stafford loans, on the other hand, aren’t offered according to income. Moreover, not every student can qualify for the topmost amount. In this program, eligibility is influenced by your year in the institution, additional awards on financial aid, and the attendance cost estimate. Students who go for this category of Stafford loans for college are in charge of paying all the interest accumulating. This includes while in school, in the grace period, and while on deferment. If you opt not to pay the interest, the amount will accumulate and add to the principal balance, leading to an increase in the repayment amount.
You can apply for either subsidized or unsubsidized loans, provided you do not exceed the annual borrowing limits.