Stafford Loans Terms and Repayment

You may be familiar with many aspects of a Stafford loan but we wanted to provide some specific information that is often overlooked or misunderstood.  While securing a scholarship or grant would be the ideal financial aid solution, a Stafford loan is also a viable consideration.  Guaranteed by the Federal Government, this type of college loan offers low and fixed interest, flexible dollar amounts, and excellent repayment plans.  Therefore, if you are eager to start college, return to college, or advance an existing degree, understanding as much financial aid information for a Stafford loan would be extremely beneficial.

Stafford Loans Terms and Repayment

The first area we wanted to cover for financial information for a Stafford loan has to do with interest.  As mentioned, this type of loan comes with a low and fixed interest rate.  While the subsidized loans have the lowest rates, even the unsubsidized loans are competitive and a much better option than securing money through a private lender.  For instance, if you were to qualify for a subsidized Stafford loan the fixed interest rate would be set at 4.5% but if you qualified for an unsubsidized loan, interest would be at 6.8%, which is still very low, especially when compared to financial aid from banks and credit unions.

It is also important to understand that financial information for a Stafford loan pertaining to interest would not change as long as you are enrolled or attending college.  In addition, the interest rate established would never change throughout the life of the loan.  That means from the day the money is secured to the day the loan is paid in full interest would not waver.  As a result, you would be able to work on your college degree without worrying about money owed or interest increasing, which would put you even further in debt.

In this article on financial aid information for a Stafford loan we also wanted to talk about repayment options.  Remember, this money is guaranteed by the Federal Government so for you as the student it means low pressure whereas if you were to borrow college money from your bank or credit union, repayment schedules would be far more aggressive.  With a Stafford loan, you have flexibility, as well as time to get the loan paid off.

The first payment would not be made until you have graduated from college, reduced attendance to less than half-time, or dropped out for some reason.  Even for all three of these scenarios, with a Stafford loan a six-month grace period is provided before payments must begin.  This means that upon graduation, going to less than half-time, or dropping out, for a full six months no payment on the loan would be required.

Next, we wanted to show you repayment options as a part of the financial aid information for a Stafford loan.  In keeping with the concept of flexibility, this type of loan offers several different repayment schedules to include:

•    Standard Repayment Plan – For this, you would be required to make a payment each month in a fixed amount that included both the principal balance and interest rate.

•    Graduated Repayment Plan – For this second option, the amount of payments would be less initially but then over time, those payments would increase.

•    Income-Based Repayment Plan – In this case, payments on the Stafford loan would be based on the amount of the loan but more importantly, on your annual income.

•    Extended Repayment Plan – The last option provided is available on Stafford loans of $30,000 and more.  With this, you could choose from a Standard Repayment Plan or Graduated Repayment Plan.  No matter the preferred plan, payments could be made over a period up to 25 years.

The last thing we wanted to mention regarding financial aid for a Stafford loan is that options for deferment and forbearance are also offered.  Of course, it would be to your advantage to make all payments in the amount due and on time but if you were faced with a situation of needing more time, a deferment or forbearance option would be available.  No matter the amount of the Stafford loan, interest rate, or the repayment plan, the money borrowed could be used for tuition, books, lab time, room, board, and other miscellaneous expenses associated with college.

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