Stafford Loans

One of the primary sources for student loans is the federal government. These are called Stafford loans. There are two types, direct and FFEL. These differ in a number of respects and have the same eligibility requirements. The major differences are how the loans are repaid and the needs.

The direct student loan program receives its funds from the federal government. The FFEL uses private lenders such as banks and credit unions for funding. Not all private lenders participate in the FFEL program. The repayment options also depend upon which institution is used and their particular requirements. There are two types of loans, subsidized, and unsubsidized.

A subsidized loan is based on financial need. The federal government subsidizes the interest on these loans. This interest does not get applied during the period prior to repayment or during authorized repayment periods.

An unsubsidized loan is available to almost anyone. These loans have the interest start to accrue from the moment the loan is authorized until the loan is paid in full. In addition these loans can be capitalized. This means that the interest will be added to the principle and the interest will then be applied to this higher amount. To keep this at a minimum, it is suggested that at least the interest be paid as it accumulates.

The amount of money available is dependent upon whether you are a full time or half time student. No Stafford loans are available to students who are enrolled for less than one third of an academic year. Your financial aid department will assist in determining the amount of money available. Both the direct and FFEL loans are in addition to other monetary sources such as grants and scholarships. Because these are interest-accumulating loans it is best to consider any available grants, gifts or scholarships first and then base the loan upon the remaining balance.