Stafford Loans Are a Must | 02.13.09
With tuition costs at record highs, and federal Pell Grants only covering a fraction of the cost, Stafford loans have grown in importance and serve as an essential ingredient for today’s students looking to fund their college education.
Since the late 70′s, tuition and fees at private four-year colleges have increased nearly tenfold. And while those fees have far outpaced inflation the same can not be said for the federal Pell Grant. The Pell Grant was created in 1976 to help aid lower-income students with the cost of higher education, but those funds don’t go nearly as far today as they once did.
When the Pell Grant program was first launched it covered about 70% of the cost of attendance at a typical four-year institution. Today the Pell Grant covers a mere 30% on average. One notable way students help bridge the widening gap between tuition costs and Pell Grant funds (for those who are eligible) is with the federal Stafford loan.
Stafford loans are federally backed and available to students attending Title IV certified schools. The loans, however, do hold yearly maximum allotments. The maximum allotments are determined by your year in school as well as your status (dependent or independent). Unlike Pell Grants, Stafford loans must be repaid after you graduate, and generally hold a 10-year repayment term. In addition, Stafford loans are divided into two categories, subsidized and unsubsidized.
Subsidized Stafford loans are awarded based on financial need. You will not be charged interest before you begin repayment or during periods of deferment. The federal government “subsidizes” (or pays) the interest during these times. No payments are expected on the loan while you are enrolled as a full or half time student.
Unsubsidized Stafford loans are not awarded based on financial need. Any eligible student can take out Unsubsidized Stafford Loans. You will be charged interest from the time the loan is disbursed, to the time the loan is repaid in full. No payments are expected on the loan while you are enrolled as a full or half time student.
For the upcoming 2009-2010 academic year the interest rate for subsidized Stafford loans, for undergraduate students, is fixed at 5.6%. If you fall into the unsubsidized category you will be extended a 6.8% fixed interest rate. To determine your eligibility and see if you qualify for a subsidized or unsubsidized Stafford loan you must first complete a FAFSA.
FAFSA stands for free application for federal student aid, and is available to all U.S. citizens, U.S. nationals, and U.S. permanent residents who have an I-151, I-551, or I-551C (permanent resident card). The FAFSA is your key to any federal loan or Pell Grant.
It’s true that tuition costs are out of control, but don’t focus on that. Set your sites on matters you can control, like getting the financial aid you need for school. You have the financial aid tools, now it’s time to put them to good use.
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