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What is a College Stafford Loan?

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  • Written By: K T Solis
  • Edited By: Heather Bailey
  • Last Modified Date: 13 April 2018
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A college Stafford loan is a government loan granted to students who attend an accredited college or career school. The loan helps them pay for the cost of tuition, books, and living expenses. Since it is a loan, students are required to pay the money back to the government. There are two types of Stafford loans that students can receive: a subsidized loan and an unsubsidized loan.

A subsidized college Stafford loan is granted to students who demonstrate financial need. This type of loan does not accrue interest if three criteria are met. For example, no interest is accrued while the student is still attending school at least part time. It also does not accrue interest until six months after the student has graduated. If the student chooses to defer the loan, interest is not accrued until the deferment has ended.

An unsubsidized Stafford loan is granted to all students, regardless of their financial situations. In contrast to the subsidized version, an unsubsidized loan accrues interest even if the student is still enrolled in school. All college and career students are eligible for this particular type of college Stafford loan.

In order to apply for student loan, all students must fill out a form called the FAFSA, or the Federal Application for Federal Student Aid. This form is used by the government to determine the type of financial assistance that will be given to each student. Students complete the form by providing details about their personal data, financial situation, and other information that helps the government determine a student's award amount.

Before accepting a federal student loan, students should also seek scholarships, sources of free money for college. Unlike student loans scholarships do not have to be paid back to the organization that awarded the money. If a student is unable to find a scholarship that can cover most of his or her tuition, the student should then consider accepting the loan.

Wise students should consider that they are not required to accept the entire loan amount offered by the government. They can always ask the amount to be reduced in accordance to the amount they are able to repay. Students should determine their budget in advance to decide how much money they actually need to pay their school-related bills. It's important to learn about interest rates, loan fees, and payment plans before accepting a college Stafford loan or any other type of loan. By striving to pay the interest on a loan while still enrolled in college, a student can begin to reduce the overall amount owed after graduation.

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