Stafford federal loan

Stafford Federal Loan is a low interest and long term loan (normally lasts for 10 years) with many benefits to the student. Interest may vary but there’s a limit to how much it can grow: 8.75 %. Interest is reviewed on July 1st every year, and it’s guaranteed by the federal government through the education department.

Stafford Federal Loan is the most popular and widespread loan type among students because the repayment conditions are quite flexible. Sometimes the student can just pay a monthly minimum of USD 50.00, or they can choose a gradual installment increase.

Direct and FFEL Stafford Loans have variable interest rates (unlike Federal Perkins Loans) and are for both undergraduate and graduate students. The loans you receive will be either subsidized or unsubsidized.

Subsidized Stafford loan

A subsidized loan is awarded on the basis of financial need. You won’t be charged any interest before you begin repayment or during deferment periods. The federal government “subsidizes” the interest during these periods.

Government pays for the entire loan interest while the student is still studying.

Students don’t repay interest until six months after they finished or left university.

You need to prove your economic need to obtain this kind of subsidy. You also need to have applied for a Pell grant beforehand, and you must be either an American citizen or a foreigner with a permanent residence permit.

Unsubsidized Stafford loan

An unsubsidized loan is not awarded on the basis of need. You’ll be charged interest from the time the loan is disbursed until it’s paid in full. If you allow the interest to accrue (accumulate) while you’re in school or during other periods of nonpayment, it will be capitalized. This means the interest will be added to the principal amount of your loan, and additional interest will be based on that higher amount.

› Students pay for the loan’s interest while they are studying. You can choose whether or not to defer interest repayment while studying.
     › If interest repayment is deferred, when you finish university you must repay the whole accumulated interest plus the pending capital, according to the conditions agreed when the loan was granted