Stafford Loans

Stafford loans are the main method by which students borrow money to pay for their college education. There are two types: subsidized and unsubsidized. Subsidized Stafford loans are offered on the basis of financial need: that might mean checking the finances of your family or of just you alone if you are fully independent. Unsubsidized Stafford loans are available to all who meet the basic criteria (US citizen or permanent resident, enrolled at least half time in a qualifying college and so on).

Continue Reading

One major difference between the two types of Stafford loan is that the subsidized loans do not charge interest or require repayment until the student has finished school. It is a very different situation with the unsubsidized: here the interest starts to accumulate as soon as the loan is granted. If the student does not pay this interest during their time at college the payable amount of the loan will increase as that interest is capitalized. This is very similar in concept to reverse amortization on a mortgage.

Until 2006, Stafford loans were offered with adjustable interest rates. As of July 1 st new loans are offered with a single fixed rate for the duration of the loan. With interest rates on the rise this means that those with older loans might want to think about consolidation or refinancing of their loans. There are no application fees or pre-payment penalties for this process, so applying to consolidate your loans is a win/win situation.

While Stafford loans are a great way to help cash-strapped students get through college, consolidating those loans upon graduation will help them get through the difficult early post-college years by driving down their monthly payments.