Subsidized Stafford Loan
The Federal Direct Subsidized Stafford Loan is available to students considered low-income or are in need of money for college. The Subsidized Stafford Loan is beneficial because the U.S. Department of Education pays for the interest on the loan while the student is still in school, during the grace period, and during deferment. For example, the Subsidized Stafford Loan will not accrue interest while enrolled in school, during a 6 month grace period following graduation, and during periods of deferment. Another advantaged is that the Subsidized Stafford Loan carries a fixed interest rate that is set annually, which mean your rate can decrease from one year to the next while in school. Having a lower interest rate will lower your overall cost of the loan.
Students that are considered low-income are eligible to receive a Subsidized Stafford Loan. In order to determine if you qualify as low-income, you will need to complete and submit the FAFSA, also known as Free Application for Federal Student Aid. The FAFSA takes into account your current income, assets, number of family members in school, family size, and the cost of attendance.
Dependent and Independent Students that are eligible to receive a Subsidized Stafford Loan can receive between $3,500 and $5,500 per year in award amounts. The award amount is based on the information you provided within the FAFSA Application. Qualifying students that are in their first year of college will receive an award amount of no more than $3,500, while students that have completed at least two years of study will receive no more than $5,500.
The Subsidized Stafford Loan offers a competitively low interest rate for borrowers. The interest rate for Subsidized Stafford loans first disbursed on or after July 1, 2009 is fixed at 5.6 percent. Over a four-year period beginning July 1, 2008, the interest rate on subsidized Stafford Loans made to undergraduate students will be reduced. Loans made after July 1, 2010 and before July 1, 2011 will have an interest rate of 4.5 percent and loans made on or after July 1, 2011, but before July 1, 2012 will have an interest rate of 3.4 percent.
As you can see, the Subsidized Stafford loan offers a very competitive interest rate that many private financial institutions cannot compete against. This will allow borrowers to save even more money throughout the term of the loan. Students should first apply for a Stafford Loan before searching for other private student loans, since the interest rate and repayment terms are much more favorable.
The Federal government is able to offer much lower rates than private institutions, since they are not profiting from the loans that are made and they have much less overhead (lower costs to maintain the Direct Loan Program). All repayments go back into the Direct Loan Program to fund other students education
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