Stafford loans were established by Congress in 1965 as part of the FFELP (Federal Family Education Loan Program) to provide financial aid for students. They were originally intended to help student who were 'in need' but just what was meant by the term 'in need' was not entirely clear and the program was rapidly expanded. Today, Stafford loans account for more than 90% of the $50 billion dollars plus which is distributed each year to the various FFELP programs.
One way in which the definition of 'in need' was quickly broadened was to create two different forms of Stafford loan - subsidized and unsubsidized.
In the case of subsidized loans, the Federal Government pays the interest charges which would ordinarily accrue from the date on which the loan is originated until payments start. Usually, no payments are made while the student is attending school (as long as the program is a half-time program or greater) and for a further six month grace period after completion of the course. Students can however request that payments begin earlier if they wish to start repaying their loan before the usual date.
Because the government pays interest on these loans they are normally need-based in that aid officials will look at a student's family income when deciding whether or not to grant a loan. In making their decision a number known as the EFC (Expected Family Contribution) is used and this is obtained from income information provided on the FAFSA (Free Application for Federal Student Aid) application form.
About two out of every three subsidized Stafford loans are given to students whose parents have an adjusted gross income of less than $50,000 per year. A further 25% are awarded to students whose families fall into the $50,000 to $100,000 per year range. However, the definition of 'in need' is still very flexible and about 10% of subsidized loans are given to students whose combined family income is in excess of $100,000.
If a student does not qualify for a subsidized loan then he or she will normally be eligible for an unsubsidized Stafford loan. In this case interest due on the loan accumulates from the day the loan money is disbursed until the day that the loan is paid off and interest charges can build rapidly. For example, even in we take the case of a modest $5,000 loan, at 6.8% the first year's interest charge is approximately $430 and this is added to the $5,000 with further interest charges being applied to the higher figure in subsequent years.
Trying to work out interest payments can be a complicated business, especially if you have a series of different loans taken out over two or three years in college, because, while interest is quoted as an annual figure, it is calculated monthly and added to the loan principle as you go along with interest in subsequent months being charged on the increasing figure. A good approximation can be made however by using one of the many freely available online mortgage calculators.
From the example above it should also be noted that $5,000 is a very low figure as student loans go and that most students will borrow considerably more than this. Indeed, the average student probably borrows about $15,000 in a mixture of different government and private loans
Friday, May 29, 2009
Subscribe to:
Post Comments (Atom)
Blog Archive
-
▼
2009
(278)
-
▼
May
(56)
- Schooling You Longing To Know About Student Loans
- Some Considerations About Personal Loans
- Looking at Student Loan Debt Consolidations
- Subsidized and Unsubsidized Stafford Student Loans
- How to Refinance Student Loans: 5 Tips
- Little Known Student Loan Interest Rate Facts
- How To Repay Back Your Student Loans
- You Should Get A Student Loans If You Really Need It
- The Truth About Student Loans
- Myths about Student Loan Refinancing Dispelled
- No Credit Check Student Loans Explained
- How Consolidation of Student Loans Works
- Why Go For Student Loan Consolidation
- Student Loan Consolidation and Solve your Student ...
- How to Find Low Interest Student Loans
- Worried About Student Loans, Bad Credit Causing Pr...
- Personal Finance. Credit Agencies Refused Access T...
- Personal Finance. Student Loans Debts Do Not Go On...
- Student Loans And The Price Of An Education
- Student Loans And The Price Of An Education
- How Student Loans Work
- Student Loans – A Simple Guide
- Consolidate Private Student Loans - 4 Benefits You...
- Lead A Debt Free Student Life, Obtain Debt Consoli...
- Repayment to Begin on Student Loans; NextStudent o...
- Loans For Every Occasion: Home Loans, Payday Loans...
- NextStudent Offers PLUS Loans for Graduate and Pro...
- Plan a Bright Future ahead with International Stud...
- What Happens When You Default on your Student Loans?
- Refinance Your Student Loans
- How To Handle Student Loans Appropriatly
- Student Loans Consolidation Must Known Secrets
- What Are Plus Student Loans?
- How Consolidation of Student Loans Works
- No Credit Check Student Loans Explained
- UK Financials Ltd introduce Student Debt Consolida...
- College Student Loans - An Overall Guide
- Student Loans For Bad Credit Scores
- Financing Your Education: Your Future Is In Your H...
- What You Should Know About Student Loans
- Understanding Federal Student Loans
- Student Loan Consolidation Centers Should Have Com...
- Student Loan Consolidation Centers Should Have Com...
- Student Loan Consolidation: Make your Student Loan...
- Cheap College Loans: for a Stress-free Student Life
- Is Student Loan Consolidation on Private Loans Rea...
- Student Loan Consolidation Can Help
- All About Federal Student Loan Consolidation and I...
- Student Loans Come in a Variety of Types and Payme...
- Student Loans: Cut Monthly Payments on your Studen...
- How To Get A Bad Credit Student Loan or Student Lo...
- Student Loan Consolidation Info For Students
- Cheap College Loans: for an Uninterrupted Education
- Need A Student Loan? Three Kinds Of Student Loan F...
- Can’t Afford College Education? Applying for a Stu...
- Pursue Education With College Loan
-
▼
May
(56)
No comments:
Post a Comment