August 8, 2006

Stafford Loans 101 – what parents need to know

Posted in Stafford Loans at 2:43 PM by Joe From Boston


Stafford Loans are a type of Federal financial aid that many students use to cover the cost of education.  So what does this mean, exactly? 

1)      It’s a loan – it has to be paid back

2)      Stafford Loans must be taken out in the student’s name, they cannot be taken out in the parent’s name

3)      They are awarded by your school’s financial aid department.  You cannot get a Stafford Loan unless your school has awarded you one.

4)      There is a maximum amount you can borrower

5)      The interest rates are fixed – so you don’t have to worry about Bernanke’s interest rate hikes.  They can, however be raised by Congress.  New rates normally go into effect on July 1st of the following year.

 And most importantly – there are two types of loans: subsidized and unsubsidized. 

Subsidized Stafford loans do not accrue interest while the student is in school (normally more than 12 credits).   This means you save money in the long run.  This also means that financial aid offices give these loans to people who need the most help. 

Unsubsidized loans begin to accrue interest from the day the loan is disbursed.  You pay more in interest over the life of the loan than in subsidized loans.  Though because the government does not pay the interest, these loans are awarded to more people and can have a higher amount awarded each year.

So that’s it for Stafford Loans 101 – more in-depth next week.

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1 Comment »

  1. nut said,

    Typo:

    4) There is a maximum amount you can borrower

    I know, I know, I’m obsessed.


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