What Is A Stafford Loan

What Is A Stafford Loan

The field of education is a lucrative market and is a notoriously expensive investment for parents. Many citizens in the country are from the middle class strata of society, which means affording education is a grey area. As a result, the student loan industry is said to be massive in the country and has helped out a lot of people achieve their education especially who deserve it and want to make it big,

One such student loan is called the Stafford loan. It is also the called a Direct loan or a Federal Stafford loan since the government offers it to undergraduates, graduates, or those students who wish to complete a Master’s degree or a PhD.

Since they have fixed interest rates, a subsidized Stafford loan seems a better option since the government pays interest on them while the child is studying in school or on loans that have been deferred till graduation. However, there is a borrowing limit attached to it. While an unsubsidized Stafford loan involves students having to pay a certain amount of interest on the loan. If not paid, then it is added to the loan balance for the future. There are lesser borrowing limits in this.

It is said that 32 million borrowers in the country have at least one Stafford loan, which comes up to a staggering $722.2 billion. If you happen to be a first time borrower, these loans are the simplest to opt for. There are low interest rates and they offer more flexible options when it comes to repayment. Private loans on the other hand, are much more stringent, having lack of income-based repayment options.

Stafford loans are not predicated on credit scores. However, you need to make sure that you as a student are enrolled in an institution that is a part of the direct loan program and that gives you a degree or certificate for your course.

You can know whether you are eligible for a direct loan if it is listed in your financial aid award letter. All that needs to be done then is entrance counselling and submission of a Master Promissory Note (MPN) for the application of the loan. The government will then process and accordingly approve your MPN by giving out fund for the loans through the college in which you have taken admission. The college will cover your tuition and fees, room and other school costs through it.

Generally, direct loans can be paid between a period of 10 to 25 years. Although interest rates may differ depending on the degree and loan type you take, it is 4.45% for undergraduate students whether they take a subsidized or an unsubsidized one, making it a very friendly option, while for graduates or postgraduates, it comes up to 6%. However, assessing the loans with private student loans is essential before you come to a final decision.