Stafford Student Loans

March 24, 2009 by  
Filed under Student Loans

Stafford student loans are a very big part of the Federal Family Education Loan Program (FFELP) and were established by Congress in 1965, in order to give students ample financial aid. Stafford student loans were originally made in order to cover the costs of those in need. Nowadays, Stafford student loans offer more than 90% over $50 billion dollars and are given out to different FFELP categories annually.

Compared to how things used to be, however, Stafford student loans have broadened their horizons by introducing two new types of Stafford student loans: subsidized and unsubsidized student loans.

With subsidized student loans, the Federal Government offers to pay an amount of interest that would normally build up from the beginning of the student loan until the actual payments start. Usually, no payments need to be made while the student is still in school and for half a year after leaving, but students have the right to request for payments to start earlier if they wish.

Since this interest is subsidized, the student loans are usually based on the student’s individual needs. This means that the financial aid officials need to take a look at the student’s family income before deciding whether the student is qualified for one.

Around two-thirds of these subsidized Stafford student loans are granted to those students whose family has an Adjusted Gross Income of under $50,000 per year. Another 25% are granted to those students whose family has an income of $50-100,000 per year. However flexible this might look, only less than 10% of subsidized Stafford student loans are actually given to students whose overall family income exceeds $100,000.

For students whose application for a subsidized Stafford student loan has been rejected, they are still eligible for an unsubsidized Stafford student loan. Remember, however, that the interest for this student loan begins from the day the student loan money is paid until the final day where it is completely paid off. Even if you only get a student loan of $4,000, the first year interest of 6.8% could result to a total of $230. This will then be added to the $4,000 and the interest will then be taken by the total sum.

This is only a simple example, though; in actuality, the amounts are calculated monthly, not annually. The actual equation for it is quite difficult, but you can play with the numbers on a student loan calculator.
$4,000 is an extremely low amount for a student loan. Usually, student loans go for a bit higher. On average, undergraduate students take out a student loan of $15,000 annually, whether it is in a subsidized or unsubsidized form of Stafford student loans.