The Federal Stafford Loan Program
A federal Stafford loan is one of the best options available to students to assist them in financing their higher education.The federal Stafford loan is a low-interest loan administered by the United States Department of Education. Participating schools typically either offer what is called FFEL (Federal Family Education Loan) Programs or Direct Loan programs, although some institutions participate in both.
Students approved for a direct federal Stafford loan receive funds from the federal government. Students receiving FFEL must choose a participating bank, credit union or other lender. Repayment plans for each type of federal Stafford loan may differ, but eligibility rules and loan amounts are the same.
Government subsidized federal Stafford loans are based on financial need. There are many advantages of a subsidized loan including:
- While the student attends school, the loan interest is paid by the federal government.
- The federal government pays the loan interest for the first six months after the student leaves school.
- If the student’s loan payments are deferred, the interest is paid by the government during the deferment.
Students are responsible for paying interest on an unsubsidized federal Stafford loan. Students may choose to either pay interest or have it accrue, adding the amount to the loan principal.
To apply, students must file FAFSA, or the Free Application for Federal Student Aid, which is available from the school’s financial aid office or online. Once the application is processed, the school will notify the student of eligibility and require signing of a promissory note, a contract that outlines repayment terms.
The federal Stafford loan amount depends on several factors, including:
- Use of other financial aid.
- Financial need.
- Program of study.
Disbursement of funds will be made by the school in at least two installments. Generally, first-time undergraduate borrowers do not receive funds until they have attended 30 days of classes, to ensure there is no loan to repay in the case of early withdrawal.
A federal Stafford loan is just one financial option available to students to assist them in financing their educations, however the low-interest and flexible payment terms make them a desirable choice.