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Borrowing for College: Federal Stafford Loan Profile

Posted by Lindie Johnson on Mar 17, 2015 3:30:00 PM

iStock_000047298006SmallWhen you are thinking about borrowing for college, it's important to know and understand your options. In order to get the best loan for your college career, you have to dig a little deeper into the realm of college borrowing. Federal loans have many benefits such as fixed interest rates and payment deferment to those who qualify. Although there are multiple types of federal loans, the Stafford loan is among the most common. Here is a little insight about the federal Stafford loan.   

Federal Stafford Loan Profile

Money for the Stafford loan comes directly from the federal government to help students cover the cost of higher education. The US Department of Education works with participating schools to issue the funds to eligible students. Stafford loans come with a fixed interest rate to help make the loan a more affordable option with predictable monthly payments and finance charges. 

There are two types of Stafford loans; direct subsidized and direct unsubsidized:

  • Direct subsidized loans are available to undergraduates with financial need and the amount borrowed may not exceed the financial need. The U.S. Department of Education will pay the interest on a direct subsidized loan for the initial six months after graduation, if the student is enrolled in school at least half the time, and during deferment periods.  
  • An unsubsidized loan is available to undergraduate and graduate students alike with no requirement for financial need. Unlike a subsidized loan, you are responsible for paying the interest on the loan at all times. 

Eligibility

To apply for a Stafford Loan, you must complete the Free Application for Federal Student Aid (FAFSA). Direct Loans are typically included in the financial aid package. How much you can borrow will depend on which academic year you are in school and whether you are a dependent or independent student.

You will need to be in a program that leads to a degree or certificate and be enrolled at least half of the time. There are limits as to how much can be borrowed for subsidized and unsubsidized loans per year and throughout your entire education.  

View how much you can borrow here.  If you get approved for a Stafford loan, your school will then provide you with instructions on how to receive the funds. You will be required to take entrance counseling and sign a Master Promissory Note (MPN) if this is your first time receiving a Direct Loan. The funds will then be applied to your school to cover costs like tuition, room and board, and books. Any remaining funds will be given to you for educational expenses.  

Download borrowing guide Repayment

You are required to pay your Direct Loan back when you graduate, drop out of school, or are enrolled less than half of the time. You are then provided with a six month grace period before you have to begin paying on the loan (and you only get this grace period once, so beware if you have changed school statuses several times!). You will be assigned a loan servicer when you receive your loan. This will be the organization you contact to repay the loan. There are various loan repayment plans that you can discuss with the loan servicer. Learn more about repayment plans here

Now that you know a little more about Stafford Loans, it's time to apply!  Download RISLA's Guide to Borrowing Student Loans to learn more about other education loan opportunities to help you pay for college. 

Topics: Borrowing for College