What is the most popular type of student loan now? The Stafford loan. More than 90% of all money borrowed for college fall under the category of a Stafford loan. This loan was first started to help low income families be able to send their children to college. The perimeters for the loan were not overly confined when the program was instituted in 1965. Since them the perimeters have expanded to the point that this loan type is one of the Federal Education Loan Program options for many.
The two different classes of Stafford loan, unsubsidized and subsidized, helped to extend its perimeters greatly since its inception.
With a subsidized loan students do not begin repayment until the student completes his education. For all students maintaining at least a half time course schedule the government will pay all interest that accumulates on the loan. The interest payments do not become the responsibility of the student until after he completes his education.
Families who desire this type of loan must first visit fafsa.ed.gov to complete a Free Application for Federal Student Aid (FAFSA). The FAFSA application will contain information to determine what the family’s financial status is. Subsidized federal loans are granted only to families with financial limits.
These limits are not as great as you may think. Almost 10% of the Stafford loans granted were given to families who earnings were in 6 figures. However, for the most part Stafford loans are reserved for low income families. The large majority of these loans are granted to families whose income is less than $50,000 a year. As was mentioned earlier the perimeters are broad, but the loan program does benefit the needy.
However, the perimeters do exist and not everyone will qualify. For students that cannot qualify for a subsidized loan an unsubsidized loan is an option. The Stafford loan that is unsubsidized means that you are still able to defer payments until six months after completely your education. However, during all of that time interest will accumulate and compound on the principal of the loan.
It is difficult to illustrate how much interest will compound over the life of an unsubsidized Stafford loan. To know how much your loan will cost go to bankrate.com/brm/mortgage-calculator.asp. and fill in your loan terms to see exactly how much interest you will be required to pay.
For the average student, there is a need to borrow between $10,000 and $20,000 to fund their education and these funds are generally obtained through a combination of loan types and programs.