02.22.10 | Stafford Loans, in Plain English
Now that it’s FAFSA time, I thought that the second installment of this blog should focus on a piece of federal aid that many students receive as part of their award: the federal Stafford loan. Read on to find answers to questions like: “What is it?”, “What does it do for me?”, and “What is it going to cost me?”
What is a federal Stafford loan? The Stafford loan is a type of financial aid granted from the United States government to students who file a Free Application for Federal Student Aid (FAFSA) and show demonstrated financial need. The Stafford Loan program is an evolution of the Guaranteed Student Loan Program, established in 1965, and was named after a Republican senator from Vermont who was highly honored and respected for his work on higher education reform.
The benefits of a Stafford loan. First of all, a Stafford loan is one of the best types of student loans you can get because they have fixed, relatively low interest rates — often much lower than that of the private student loan industry. Due to the fixed interest (meaning it doesn’t change over the life of the loan), there is no chance of the annual percentage rate (APR) suddenly spiking due to the economy; this should be taken a great measure of financial safety, as many students, mortgage holders, and other loan recipients have had to deal with some crazy interest fluctuations in the past two years as a result of the economic recession. The bottom line though is that the interest that is calculated on this loan will increase at the same rate through your entire repayment period — no sudden jumps of huge amounts of interest to pay off, unless you miss payments or go into default on the loan.
What does a Stafford loan end up costing? To answer this question accurately, you first need to know that Stafford loans come in two flavors: unsubsidized and subsidized. Here is a super quick reference chart for the differences between the two:
- Unsubsidized Stafford Loan
- Usually higher interest than subsidized, new loans currently at 6.8% fixed for 2010-2011
- Interest accrues while you are in school, and after you graduate
- Subsidized Stafford Loan
- Usually lower interest than unsubsidized, new loans currently at 4.5% fixed for 2010-2011
- Interest does not accrue while you are in school, or during your 6 month grace period after graduation — interest only starts to build once your loan goes into “repayment” status
To sum this information up, you pay less overall with a subsidized Stafford loan than an unsubsidized one over the life of the loan. One other nice thing about this type of federal loan is the fact that it has a generous repayment period and lots of different repayment options that will NOT overwhelm you once you graduate. The same usually cannot be said for a private student loan, which 99% of the time has a much higher interest rate (often variable) and whose lenders generally are much less flexible about repayment options.
ScholarshipPoints Code: STAFFORD2010
The Student Loan Help blog is sponsored in part by:
very helpful
July 30th, 2010 | #
The information has been very helpful.
July 30th, 2010 | #
ty
July 30th, 2010 | #
this was very informative!
July 28th, 2010 | #
cool beans.
July 26th, 2010 | #
thank, i crazy about find out what sub and unsub load
July 21st, 2010 | #
thanksss for the info.
July 21st, 2010 | #
They are very generous thats awesome
July 21st, 2010 | #
Helpful information.
July 21st, 2010 | #
thanks that helps lots.
July 20th, 2010 | #
Very helpful thanks
July 20th, 2010 | #
Very informational. i canme to ask a question but there is no need now after i read the contents on this page
July 20th, 2010 | #
my questions were answered!
July 19th, 2010 | #
Lots of people need the help of loans so this was very informative
July 18th, 2010 | #
I always get confused between subsidized and unsubsidized loans. That cleared it up for me.
July 16th, 2010 | #
good to know
July 16th, 2010 | #
Very helpful!!
July 16th, 2010 | #
I JUST TOOK BOTH AND I'M HAPPY THEY WERE APPROVED VERY FAST…..NOW I'LL GO TO COLLEGE AND FINISH MY BACHELOR
July 15th, 2010 | #
REALLY GOOD INFO!!!!….
July 15th, 2010 | #
Good information for parents and students!
July 15th, 2010 | #
interesting stuff
July 15th, 2010 | #
This was very helpful. Answered my main questions. Thank you
July 13th, 2010 | #
insightful..thanks
July 12th, 2010 | #
very helpful. learned the differences of loans. had no idea about this.
July 11th, 2010 | #
Good information
July 11th, 2010 | #
wow. thanks.
July 10th, 2010 | #
Very helpfull
July 9th, 2010 | #
helpful!
July 8th, 2010 | #
Thanks that was a help…
July 7th, 2010 | #
that was helpful thanks
July 6th, 2010 | #
awsome
July 3rd, 2010 | #
it very insightful and helps you learn about loans
July 3rd, 2010 | #
its very helpful wow !
July 2nd, 2010 | #
IT'S HELPFUL. I'M WORRIED ABOUT MY TUITION NOW.
July 1st, 2010 | #
wow! It was really interesting
July 1st, 2010 | #
excellent info
June 30th, 2010 | #
it has opened my eyes
June 30th, 2010 | #
Awesome information
June 29th, 2010 | #
Good info! Really important if your a college freshman!
June 28th, 2010 | #
This is good information for a student to know because I had to lean this information on my own my freshman year in college.
June 28th, 2010 | #
very hellpful!
June 28th, 2010 | #
interesting blog
June 26th, 2010 | #
so much great info
June 25th, 2010 | #
woot
June 24th, 2010 | #
Student loans are important
June 24th, 2010 | #
I am a freshman in college, I considerate is good information. Now I know the different between the two type of loans and the interest rate they both have.
June 24th, 2010 | #
very helpful info thanks
June 23rd, 2010 | #
This was very informal. I appreciate this.
June 22nd, 2010 | #
wow, thats amazing! thanx
June 21st, 2010 | #
wow! i find this very persuasive nd interesting,never knew thought of it that way.thanks!
June 21st, 2010 | #
Thanks
June 20th, 2010 | #
Thanks so very much for info.
June 20th, 2010 | #
very informed i am now
June 19th, 2010 | #
helpfull
June 15th, 2010 | #
can i apply for an unsub.loan at any time or just while school is i session
June 14th, 2010 | #
thanks for the info!!
June 14th, 2010 | #
Thanks! Helped alot
June 13th, 2010 | #
good informaiton
June 12th, 2010 | #
Good info
June 12th, 2010 | #
Thanks it really help me understand what the Stafford Loan was about zand what it does
June 11th, 2010 | #
THANKS!! it helps so much!
June 10th, 2010 | #
I didn't know about any of this before! thanks!
June 9th, 2010 | #
very helpful !!! thnx
June 8th, 2010 | #
Great information and just in time
June 7th, 2010 | #
I agree that this was finally an easy way to understand between the two loans. What I still am unsure of is if the College determines how much we are eligible for, or if we apply for that??
June 4th, 2010 | #
Finally, a simple and easy to understand explanation of government loans!
June 4th, 2010 | #
Thanks for such helpful information.
June 4th, 2010 | #
This really helped a lot.
June 3rd, 2010 | #
Good to know
June 2nd, 2010 | #
kool, i was really taking sub-loan & it seems good now I realize the interest rate..
June 2nd, 2010 | #
helpful
May 31st, 2010 | #
I received a Stafford loan, and now I know how it works. Thanks!
May 31st, 2010 | #
very useful information
May 30th, 2010 | #
It sounds like a scholarship, but it's a loan.
May 30th, 2010 | #
well i think it should be a scholarship not a loan
May 28th, 2010 | #
awesome! Thanks a lot
May 27th, 2010 | #
The way that this was written is so clearly stated in great information.
May 27th, 2010 | #
Well written
May 27th, 2010 | #
very helpful!
May 26th, 2010 | #
It clarified Stafford loans to me…thanks
May 25th, 2010 | #
this is really helpful, thanks a lot! i am very much looking forward to starting college.
May 25th, 2010 | #
thank you
May 25th, 2010 | #
Good info, thanks.
May 23rd, 2010 | #
Good information that can be very helpful to many students. It is too bad that many people don't quilify for grants due to their parents' income. Once a person turns 18 I think that should be be the basis of one's need.
May 22nd, 2010 | #
Very helpful! I never new this before.
thank you.
May 22nd, 2010 | #
It is a lot of things I did not know about school… that can really help us with college! I'm very excited and can't wait for my college career to start!
May 21st, 2010 | #
helpful info!
May 20th, 2010 | #
Loans are not fun at all. 10 thousand is a lot of money. Good luck paying it off.
May 19th, 2010 | #
very helpful information. Not all places tell you what this stuff actually is.
May 19th, 2010 | #
Loans are depressing. I owe 10,000 dollars for an associates degree is just as worthless as a High School Diploma.
May 18th, 2010 | #
Very good information as I am signing up for both loans next week.
May 18th, 2010 | #
@ Mayra – Please check out my blog post on Stafford loan maximums for the answer to this question.
Thanks for the great question
-EJ
May 17th, 2010 | #
Completed FAFSA and determined that our income is too high. What would be the maximum yearly loan we could obtain from a Stafford Loan? Is it the $2000 unsubsidized amount or the total of the subsidized and unsubsidized amounts at just different interest rates?
May 17th, 2010 | #
This was very interesting. I will most definitely get one
May 17th, 2010 | #
WOW! this was really good information needed because before hand I totally did not know much about stafford loans this was much to my enlightenment.
May 16th, 2010 | #
i agree
May 16th, 2010 | #
helpful information.
May 14th, 2010 | #
helpful information
May 14th, 2010 | #
I have my loans from them and its good.
May 13th, 2010 | #
very informative.
May 13th, 2010 | #
this was very interesting and helpful information. It was also very insightful.
May 11th, 2010 | #
@ Yessica – If you do not have a social security number, you will not qualify for federal student loans. It is a requirement to be a US citizen or resident alien in order to be considered for federal financial aid. You will likely find similar problems at private banks as well; they tend to require a social security number too.
My advice to you is to apply for a lot of scholarships and speak to your school's financial aid department. In many cases, schools have special programs for international students so that they can afford the tuition even without federal aid. Good luck!
May 11th, 2010 | #
This is very valuable information …….yet my questions is does stafford also help people that do not have a social security number like me
May 11th, 2010 | #
Good information.
May 11th, 2010 | #
Thanks for explaining the difference so clearly and succinctly. Really helpful.
May 11th, 2010 | #
Considering it
May 8th, 2010 | #
great information
May 7th, 2010 | #
@ Joanna – That depends on how much you were awarded. If you are a dependent student, you can receive up to $5,500 ( first year, $3,500 sub, $2,000 unsub), $6,500 (second year, $4,500 sub, $2,000 unsub), or $7,500 (third year and higher, $5,500 sub, $2,000 unsub). If you did not receive the full amount for your bracket, you can appeal and ask for more.
However, those numbers are totals per each type. So if you are a first year and only qualify for $2,500 in sub loans, you can't make up the extra $1,000 in unsub Stafford loans.
April 26th, 2010 | #
I'm a bit confused about one thing. I am receiving a subsidized Stafford loan and a certain amount via the unsubsidized Stafford loan. This was all arranged through my school's financial aid office.
Can I apply for an additional amount as the unsubsidized loan, or to increase the amount of the unsubsidized Stafford? Or is the amount given through my school the maximum for this year?
Thanks in advance for your answer.
April 25th, 2010 | #
Aye this wasreally helpful whaen i got my loan i didn't understand a thing!
April 21st, 2010 | #
I already have a stafford loan. thank you
April 21st, 2010 | #
Although I I was offered a Stafford loan, I didn't accept it. Even though I didn't accept it, people who are offered these types of loans should definitely attend the workshops that they offer.
April 12th, 2010 | #
good information, I have one of theose now
April 11th, 2010 | #
good post i can use this for college
April 6th, 2010 | #
Hello Brenna,
There are actually a few different types of loans offered by the government for school, as well as grants if you qualify for them (usually based on financial need.) If you go to the search box and look for my "in Plain English" blogs, you'll see a breakdown how each program works.
Thanks for the great question!
April 5th, 2010 | #
This is helpful. Are Stafford loans the only gov't loans offered or are there others?
April 2nd, 2010 | #
OH wow well this was pretty helpful cause i have one and yet i was still a bit confused as to what this Loan really was
April 2nd, 2010 | #
I have one of these now
April 1st, 2010 | #
Wish I read articles like these in high school. Would've really helped me a lot.
March 28th, 2010 | #
Most of my debt is subsidized but to attend summer school and get a new computer I had to get an unsubsidized Stafford loan. Worked great. I do pay roughly $90 twice a year for interest – actually began about $100 and the interest keeps going down a little each time I pay (that's why I stated roughtly $90)
March 23rd, 2010 | #
Now I know the difference betwixt a subsidized and an unsubsidized loan; this tidbit of informaion will assist me in the application process
March 20th, 2010 | #
Thanks for clearing that up!
Never knew what a stafford loan was!
March 16th, 2010 | #
Great information
March 15th, 2010 | #
Clear explanation of the difference between subsidized and unsubsidized Stafford loans.
March 13th, 2010 | #
nice! hope everyone can get good opportunities and succeed in scholarships!
March 12th, 2010 | #
It has good info Ive already applied for FAFSA and its awarded me a lot of money
March 12th, 2010 | #
Well, the subsidized Stafford loan is need based and capped at a certain borrowing limit per year. The unsubsidized Stafford loan allows you to take out more money if you need it, and still have a low interest borrowing option if you don't qualify for need-based aid.
March 12th, 2010 | #
So why would anyone apply for an unsubsidized Stafford?
March 11th, 2010 | #
It's good to know this information is out there for us.
March 11th, 2010 | #
Good information for people that want to take a loan.
March 9th, 2010 | #
The Stafford Loan is one of the most widely used type of Student Loans and it is fitting that it be explained in plain english and great detail. I am very thankful to have received the Stafford Loan to begin my education.
March 5th, 2010 | #
great information, will need to apply this to my life!
March 3rd, 2010 | #
I hope I don't need a loan, but if I do thanks for the info.
March 2nd, 2010 | #
thanks so much!
March 3rd, 2010 | #
really informative. thank you!
February 26th, 2010 | #
i never thoght about getting a loan, but i never know if ill be able to pay it. Therefore it is a very good infrormation!
February 25th, 2010 | #
Appreciate this information, thanks.
February 25th, 2010 | #
very helpful
February 23rd, 2010 | #
it is a very good informtion especially for those who are planning to atke out a loan
February 23rd, 2010 | #
Good information.
February 22nd, 2010 | #