Subsidized Student Loans

Students with severe financial problems wanting to continue their education and attend college may qualify for a subsidized federal loan. For subsidized student loans, one of the most often mentioned and commonly disbursed are the Stafford loans. Subsidized student loans are interest free, but it is important for students to understand the loan process and also meet the specific qualifications necessary to apply for subsidized student loans. Two good sites with information on student loans are CollegeScholarships.org and StaffordLoan.com.

A person must have an understanding of the way a standard loan works to comprehend how a subsidized student loans works. To qualify and obtain most standard types of loans, the lender does a credit check on the person. If the person has a good credit rating and the lender approves the loan, they usually get a fixed interest rate. Once the lender disburses the loan funds, the payments become due at that time. Some loans have an option where the student only pays the  interest fee until he or she finishes university and graduates.

With a subsidized student loan, the borrower does not pay the interest on the loan, unlike a traditional loan. The federal government covers this part of the subsidized loan, not the student. The subsidized Stafford Loan administration has very rigid rules regulating who qualifies, because not everyone that applies for a subsidized student loan will get approval. To determine eligibility, the FAFSA or Free Application for Federal Student Aid is the standardized form that the student must submit. For returning students there is a renewal FAFSA to fill out. The FAFSA form must show that the student is seriously lacking the adequate financial funding necessary to attend university or college based on a low Expected Family Contribution or EFC. To qualify, the applicant must be entered or attend school full or half-time. There is no credit check required so students that have never worked or have no credit history but can show evidence of independence from their parents or parent could be eligible. Even though the parents of a student applying for a subsidized student loan are still qualified to apply, if they have a high income, this will disqualify their son or daughter from receiving a subsidized student loan.

As soon as the student receives their award letter, they should immediately apply for the subsidized student loan. Some students may also want to look into other Stafford loans, federal student loans or even private loans. Once approved, the lender normally disburses the subsidized student loan directly to the college or university, usually in two installments at the beginning of each semester. The school uses the loan money to pay the students fees and tuition and if there is any cash remaining, the college pays you this directly or credits your account, depending upon the school policy.

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