Stafford College Loans

Stafford college loans are Federal student loans that offer a fixed low interest rate and do not have to start being paid back until six months after graduation. This type of financing can be obtained after filing for Federal financial aid. The first step in the process of going back to school is to fill out an application with the school of choice. After being approved a student will be instructed to go online and fill out an application for Federal financial aid. Once this is done the school will allow students to choose who they want to use for Stafford college loans. Student loans are generally non-negotiable fixed rate loans. This means the interest rate will stay the same throughout the life of the loan. Making financial arrangements to be able to go back to school and get an education is much like an investment. The investment may seem costly but in most cases the investment more than pays off as the borrower is able to excel in a current position or find a better paying position somewhere else. "A wise man will hear, and will increase learning; and a man of understanding shall attain unto wise counsels" (Proverbs 1:5).

The two types of financing available are subsidized and unsubsidized. Subsidized Stafford college loans are given to a student based upon his or her financial situation. Subsidized financing does not include interest until the student begins repayment. Unsubsidized financing means that the student is charged interest at the time the funds are disbursed even though they will not have to be repaid until six months after graduation. Unsubsidized interest rates are normally higher than subsidized interest rates. There are limits on the amount that a person can qualify for when it comes to both types of funding.

Important factors that are helpful to know about Stafford college loans can be found on the Internet by doing a search. There are limits on the maximum amount of funding depending upon the year in college and whether the student is an undergraduate or a graduate, a dependent or independent. Deferment from paying back the funding can be granted for various reasons. If a borrower becomes unemployed he or she can ask for a deferment. If a borrower goes back to college a deferment can be granted while enrolled in school. If the borrower happens to become disabled he or she can be granted forbearance where paying back the funds is postponed or reduced.

Determining whether a student is dependent or independent can be found out by going online and answering a series of questions. Students that do not qualify as independent must use their parent's information on the Federal financial aid form. Students that are dependent can have their parents fill out an application for Plus loans if needed. Plus loans have higher interests compared to Stafford college loans but the amounts that can be borrowed are higher in comparison. A student will still need to fill out the online Federal financial aid form to see exactly what he or she will qualify for in Federal aid.

The school receives the funds for students who have been approved for Stafford college loans. Then the money is disbursed and applied to tuition and housing if applicable. Any funds left over for that payment period may go to the student and the student can designate to have the funds applied to future tuition. In addition, some students may qualify for a Pell Grant from Federal aid. If the Pell Grant is not needed to cover tuition then the amount is paid to the student and can be used for purchasing supplies and books or whatever is needed. First year students have a waiting period of 30 days after enrollment before their funds can be disbursed in case they withdraw from classes early or change their mind. This is not uncommon, some students do not realize how hard it is going to be or they do not realize how much time will have to be spent on studying.

Fees that are charged for funding are usually deducted from each loan disbursement and are not usually over 4%. Some of the amount goes to the Federal government and the rest goes to the lender of the Stafford college loans. Having a Direct Stafford loan means the Federal Government is the lender and in this type of situation the fees all go to the Federal Government. The lender used is chosen by the student. The school may have some preferred lenders that they suggest but the student can choose who to use. When evaluating and choosing a lender pay attention to the fees charged and if they offer simple repayment terms. Some lenders offer better terms and discounts for students who make their payments on time.

Students who have trouble making their payments after graduation have a few options, consolidating their loans into one monthly payment, asking for loan forgiveness, or asking for a deferment. A lender may allow the borrower to have a reduced interest rate if they set up automatic bank drafts for making payments. Defaulting on Stafford college loans is not a good idea. Defaulting will be noted on financial history which could cause a significant reduction in the borrower's credit rating. A borrower may be subject to automatic deduction of the loan amount from his or her paycheck. Income tax refunds can be withheld and the amount owed will be deducted from the refund. In addition, the borrower can be sued and may have to pay late fees and collection costs.

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