Most students think that they have a right to receive a Stafford student loan year upon year, no matter what their credit history is like and no matter how frequently they pay. Unfortunately this is not necessarily the case. Just because a Stafford loan is given to you whilst you are a student, this does not mean that you can default on payments as many times as you like. The lender will come after you!

How is a Stafford loan obtained?

A Stafford student loan can be obtained in one of two ways:

1. When a student submits an application for federal financial aid it will be determined whether the student has financial need. If they do, the student will be awarded the loan as part of their financial aid package. A student can receive a subsidized Stafford student loan for every year that they attend college but they have to be re-applied for each year.

2. If a student needs further funds to be able to attend college outside of their subsidized financial award they can also apply for an unsubsidized Stafford student loan. As this loan is not subsidized by the federal government the interest rates will be slightly higher and they will have to start repaying the loan whilst they are in college. You can capitalize the repayments, but this just means that you end up owning the lender more money.

Will the lender check the credit history of a student when they apply?

It is accepted by the lenders, whether that is accredited private lenders or the government themselves, that students have little or no credit history whatsoever. Therefore the loan is awarded based entirely on the need of the student and their credit history will not be checked. If an undergraduate has got into trouble with student credit cards or repaying other private loans, this will not affect their ability to apply for a student Stafford loan every year.

Is there anything that will affect a student’s ability to apply for a student Stafford loan?

Yes there certainly is! If you are already in default on a previous Stafford loan, or any other federally supported loan, or if you owe money to the federal government, they will not allow you to apply for another loan until you clear up this financial matter with them. You need to make sure that if you have to make repayments on your student Stafford loan during college you must make them regularly and on time.