One of the most common types of federal student loans available are Stafford Loans. Stafford Loans have been aiding students in meeting tuition and other college-related financial requirements for years. There are various ways to receive Stafford Loans as well as various types of Stafford Loans to receive.
Stafford Loans are offered through the United States Department of Education, either through the Federal Family Education Loan (or FFEL) Program or the William D. Ford Federal Direct Loan (or simply Direct Loan) program. In both cases, the programs offer Stafford Loans, which are for students, as well as PLUS loans for the parents of college students.
In general, most colleges and universities throughout the United States participate in one loan program or the other; some utilize both the FFEL Program and the Direct Loan Program. The federal government supplies the money which comes from the Direct Loan Programs. Conversely, the Federal Family Education Loan Program comes from either a bank, a credit union, or a third-party lender that participates in the program. The rules and requirements for eligibility and the amount of the loans are the same with both programs; only the repayment options are dissimilar.
As aforementioned, there are two types of Stafford Loans. The first type is the subsidized Stafford Loan. What this means is that, while the borrower – the student – is actively enrolled in a college or university – on at least a part-time basis – then the government pays the interest. The government also pays the interest during the grace period following graduation – a time span of six months – and during any approved, authorized deferments after graduation. Such deferments may occur if a student returns to school or if he or she is temporarily unemployed or otherwise unable to make his or her loan payments. Furthermore, subsidized Stafford Loans are need-based loans. Students who do not qualify for need-based financial aid cannot receive this particular Stafford Loan.
The second type of Stafford Loan is the unsubsidized Stafford Loan. This is not a need-based loan, so those students who are not eligible to receive need-based financial aid can apply and be approved for an unsubsidized Stafford loan. The other key difference between the subsidized Stafford Loan and the unsubsidized Stafford Loan is that the government does not pay the interest on the unsubsidized loan at any time. Students are responsible for the interest payments even while they are enrolled in a college or university. However, recipients of unsubsidized Stafford Loans can defer the interest payments while they are in school – or at any other time, if they are approved for deferment – just as long as they understand that the interest will accrue and be applied to the principal of the loan.
Stafford Loans are popular because of their availability and flexibility. Any type of student, whether they are “well off” or in great need of financial aid, can be eligible to receive one type of Stafford Loan. Many students find that they need both, in order to adequately fund the cost of tuition and all that entails. Stafford Loans are notorious for their fair and flexible repayment options, making them ideal and affordable for just about any student imaginable.