Stafford Loans For Students

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Stafford loans are government loans offered to American college students to help them financially. Students have to satisfy certain eligibility criteria to get these government loans. The full terms and conditions of the loan are stipulated in Title IV of the Higher Education Act of 1965, including all amendments made subsequently.

The Higher Education Act of 1965 was signed as a law by President Lyndon B. Johnson in the year 1965 as part of his Great Society agenda and as per this act, the lender is guaranteed full repayment if a student defaults on their government loan repayments. The law started out as the Federal Guaranteed Education loans Program and in 1988 the United States Congress changed the name to the Robert T. Stafford loan program after Senator Robert Stafford for his contribution towards higher education in the United States. Since the lender is offered a guarantee by the government, the loans are offered at very attractive interest rates. But there are several eligibility criteria that applicants must meet in order to qualify there are borrowing limits. Applicants must get a FAFSA clearance and the loans are offered directly by the United States Department of Education through the Federal Direct Education loans Program.

Stafford loans are the most common of all education loans. Once students are qualified for the loan they can get the government loans under either the dependant scheme or independent scheme. The loan amounts as per latest data are $5,500 for dependant freshmen and $9500 for independent freshmen, $6500 for dependant sophomores and $10,500, $7,500 for dependant juniors and $11,500 for independent juniors, $7,500 for dependant seniors and $11,500 for independent seniors. Stafford loans can be either subsidized or unsubsidized. Students are not expected to pay so long as they are in college for either category but the difference is, in unsubsidized, the interest will accrue at the rate of 6.0% for the first year, 5.6% for the second year, 4.5% for the third year and 3.4% for the fourth year. The student has to pay all the accrued interest. Subsidized loans are offered to the student if he can present ample evidence to demonstrate genuine financial need. The interest for the subsidized education loan is paid by the federal government. The deferment period, referred to as grace period, continues for six months after the student leaves the school, for whatever reason – graduating, dropping out or dropping below half-time. Payback plans can stretch as long as 20 years.