One of the most common federal student loans is the Federal Stafford Loan, which is a government guaranteed, low-interest loan. Helping students with their tuition and other college expenses, Stafford loans supply students with financial help. Private organizations offer Federal Student loans under the rights of the U.S. Department of Education through the Federal Direct Student Loan Program (FDSLP) and the Federal Family Education Loan Program (FFELP). Federal student loans can cover expenses includingfees, tuition, school supplies, books, housing, and transportation.
The federal government provides the money from the Federal Direct Student Loan Program while a third party lender, such as SallieMae, a credit union or bank that takes part in the program distributes the Federal Family Education Loan. Although the repayment choices are different, the eligibility requirements, rules and loan amounts remain the same with either program.
There are Stafford loans available to undergraduate and graduate students: the Unsubsidized Stafford Loan and the Subsidized Stafford Loan.
To qualify for the Unsubsidized Stafford Loan, a student does not have to be low income. With this type of loan, the student is responsible for both the loan and the interest but payment does not start until after graduation and a six-month grace period. An unsubsidized loan does accrue interest but it has a low interest rate in order to help students continue their education and accomplish their goals.
With the Subsidized Stafford Loan, the borrower must be enrolled in a college program on a half-time or full-time basis. Instead of the student, the U.S. Department of Education pays the Stafford loan interest as long as the student remains in college, after graduation until the six-month grace period ends, or any authorized, approved deferments. These postponements can happen if a student becomes unemployed temporarily, returns to college, or cannot make their Stafford loan payments.
The student and parents must complete a Free Application for Federal Student Aid (FAFSA) before they a student's eligibility is considered to receive any type of federal loans. There is a universal formula, which the federal government uses, to calculate the financial ability to help pay for the students education.