(Please
fill up every field of the form to allow us to help
you) Paying for further education costs for your child
can appear to be daunting at first, but take comfort
in the fact that there are increasing levels of financial
aid available. In 2004, over $122 billion of student
aid has been granted to try and ensure that everyone
has equal access to further education . If you compare
this to your families Expected Financial Contribution
(EFC), you begin to realize that your EFC actually
only accounts for a fraction of the cost! This financial
aid generally comes in the form of a grant or a loan
such as a Stafford loan.
Let's focus on what a Stafford loan is and the benefits
of taking out such a student loan.
What is a Stafford student loan?
A Stafford loan is a federal loan for students. At
present, Stafford loans actually account for 37% of
education loans provided for students.
There are two types of Stafford loan available:
Subsidized Stafford Loan
To receive a subsidized federal Stafford loan, you
have to demonstrate financial need. This means that
the loan is awarded when the family has demonstrated
that they will not be able to pay for the full cost
of their child's education. Your award letter will
detail what types of loans and the amounts you qualify
for.
The aid office will ask you to choose from a list
of recommended lenders for a Stafford loan and the
loan will be sent directly to your college to pay
your fees and tuition costs.
What are the benefits of subsidized Stafford
loan?
The federal government will pay the interest on
the Stafford loan whilst you are in college.
They will also subsidize the interest after graduation.
You will not have to make any capital repayments
whilst you are attending college. The funds must
be repaid in full after you graduate but you do
not have to worry about making any financial contribution
whist you are attending college
The interest rate on a subsidized Stafford loan
is much lower than you would obtain on a private
college loan.
Unsubsidized Stafford Loan
These loans are not subsidized by the federal government
as they are not based on need. Families turn to these
types of Stafford loans when they feel that they cannot
afford their EFC, either from their income or savings.
What are the benefits of an unsubsidized Stafford
loan?
The main benefit here is that this Stafford loan
is still cheaper than a private loan. This is because
the interest rates are guaranteed by the federal government
and are kept below market levels. The main differences
to a subsidized Stafford loan are:
Interest rates will be slightly higher.
The federal government will not pay the interest
on the Stafford loan whilst your child is in college.
You can choose to capitalize these interest payments
so you do not have to pay anything until after graduation,
but you will end up owing the lender more money.
Some Stafford loan providers may require you to
make capital repayments on the loan whilst studying.
