Search:

A Look At The Basics Of The Stafford Student Loan

Back in 1965 Congress created the Federal Family Education Loan Program in order to provide financial assistance to students. One element of this program is Stafford loans which were originally intended to help only students in very real financial need but which nowadays account for in excess of 90% of all Federal Government student loans.

Since their inception Stafford loans have evolved with changing conditions and today there are two types of the loan - subsidized and unsubsidized.

In the case of subsidized loans the Government takes responsibility for the payment of any interest accruing on a loan from the date on which the loan is issued until the student has to begin repaying the loan. Normally a student will not be required to make repayments as long as he remains enrolled in a program of study that is considered to be a 'half-time' or greater program of study and for a period of six months after the conclusion of his course. However, a student can begin to make payments at an earlier point if he wants to do so.

Since the interest is subsidized, loans are generally only granted on the basis of need and aid officials will look at both a student's and his family's income when determining whether or not the student qualifies for a subsidized Stafford loan. Students need to fill out a Free Application for Federal Student Aid application that includes income details and each student is then assigned a number known as the Expected Family Contribution (EFC) calculated from the declared income figures.

Roughly two-thirds of subsidized Stafford loans are allocated to students with parents who have an Adjusted Gross Income of less than $50,000 a year. Another one-quarter of subsidized loans are granted to families in the $50-100,000 a year bracket. After this the meaning of 'need' becomes a bit blurred and slightly less than one-tenth of subsidized loans are given to students with a combined family income of over $100,000.

In the case of students who do not meet the requirements for a subsidized loan most will qualify for an unsubsidized Stafford loan. Here the main difference is that the student have got to meet all loan interest payments, though once again payment do not generally begin until six months after the completion of the student's course of study.

The mechanics of an unsubsidized Stafford loan means that a loan can be reasonably expensive because the interest builds during the period of study and so the capital sum for eventual repayment will also grow. Let us take an extremely simplified example.

Let's say that a student borrows $5,000 at the start of his first year of study at an interest rate of 6.8%. At the end of the year the interest due will be $340 and this will be added to the loan. During the following year the student will accrue interest on $5,340 at 6.8% and this will come to approximately $363 raising the total debt after two years to $5,703. Naturally this example is not wholly accurate because interest is calculated and added on a monthly basis but it does nevertheless show the principles of this type of loan.

Dependent upon the sum of money that is borrowed each year and the length of time before repayment starts you can see that students can pay a reasonably high price for delaying the repayment of a Stafford loan.

In spite of this seemingly high cost it ought to be borne in mind that a lot of the alternative methods for funding a college education can be much more expensive and that a lot of students could simply not afford to attend college without a Stafford loan.

Article Source: http://www.articleresourceindex.com

TheStudentLoansCenter.com provides information on Stafford student loans and student loans backed by the federal government

Please Rate this Article

Not yet Rated

Click the XML Icon Above to Receive Education Articles Via RSS!

Additional Articles From - Home | Culture And Society | Education

Unique Article Wizard - Submit your Article, have it "Made Unique" hundreds of times and sent to thousands of Directories! It's Like a Backlink Tidalwave!!

	Print This Article
	Post Comment
	Add To Favorites
	Email to Friends
	Ezine Ready

Submit Articles
Member Login
Top Authors
Most Popular Articles
Submission Guidelines
Ezine Notifications
Article RSS Feeds

New Stuff
About Us
Network Blog
Backlink Partner
Link to Us
Contact Us
Privacy Policy
Terms of Service

Your Ad Here

ArticleResourceIndex.com » Copyright © 2007 - Part of the Total WebPro Solutions Network
Terms of Service | Submission Guidelines | Contact Us | Link to Us| Privacy Policy | About Us