What student loans are available to go to college?

The Federal Stafford Loan

Let's face the facts, going to college is expensive. If you're looking for a little financial help, your best bet would be to apply for a grant (money that is given to you based on your need and doesn't have to be paid back). To apply for financial assistance from the Federal Government, fill out the Free Application for Federal Student Aid (FAFSA). You can learn all about how this works and fill out the form at www.fafsa.ed.gov.

If you've found that you don't qualify for grant money, your next best bet is through a scholarship. Some schools offer full-ride scholarships, which means that they'll pay for every single academic expense you have for a number of years. If you qualify for such a scholarship, chances are you've already been contacted by the school. Other scholarships offer lesser amounts of money based on either outstanding performance in academics, sports, music, the arts, or based on gender or nationality. Check out a huge database of free scholarship information at www.fastweb.com.

We're not here to talk about free money, though. If you still need money for college after exhausting all of your other resources, and you know you won't be able to make up the difference by working a part-time job, then it's time to borrow some money in the form of a loan. There are many different loans out there. Individual banks, institutions and Universities will often have their own loans to offer.

There are far too many loans to consider each one individually, so let's just consider the most popular ones. We'll start with Federal Loans (money given from the Federal Government). To apply for these, you'll need to fill out the FAFSA to see how much you qualify for, and then apply for the loan. Let's look at how Federal Stafford Loans work.

Federal Stafford Loans come in two varieties: subsidized, and unsubsidized.

Subsidized- This loan is awarded based on financial need and is interest free until you begin repayment, or with a deferment, during which time the Federal Government will subsidize the loan.

Unsubsidized- This loan is not based on need and the interest starts to build up from the moment you take out the loan. If you don't pay the interest and let it accrue (accumulate) then it will be capitalized. This means that the unpaid interested will be added to what you already owe (principal) and you will be charged interest on that new amount.

Just like with Federal PLUS loans, there are FFEL Stafford loans and Direct Loan Stafford loans. FFEL loans come from the Federal Family Education Loan Program and are dealt with through financial institutions such as banks and credit unions. Direct Loans come from the William D. Ford Federal Direct Loan Program and are dealt with through the individual University. Contact your school to determine which they offer.

Who's Eligible?

There are lots of technical legal terms that determine your eligibility.  If you are unsure if any of the terms below apply to you, it would be to your advantage to go to studentaid.ed.gov for the detailed legal explanations.

To qualify for a Federal Stafford Loan you need to be a student who is enrolled at least half-time.

How do I get the Loan?

As mentioned above, you'll need to fill out the FASA.  Next you'll need to go and talk to your lender (bank or financial institution).  They will instruct you in filling out all the necessary paper work.


How much do I get?

The amount of money you will receive depends on a few different factors, like your status in school and your dependency (speaking in tax terms).  In short, by the end of your graduation, you can't be more than $23,000 (dependant undergraduate students), or $46,000 (independent undergraduate students) in debt with you Federal Stafford Loan.

How much do I pay?

With all loans comes interest-a certain percentage charged on your principal.  The interest has the potential to change each year, but it will not exceed 8.25%.  The interest rates are adjusted each year on July 1st.  Your financial institution will provide you with the current rates, and they'll update you with any changes through the life of your loan.

Just like with a Federal PLUS load, there is a fee of 4% of the total loan that is deducted proportionately from each installment of the loan that you receive.

What are the Payment terms?

Once you graduate, leave school, or drop below half-time enrollment status, then you'll have a six-month grace period before you have to begin your repayment.  If you have a subsidized loan, you won't have to pay interest on the principal during this time.  If you've got an unsubsidized loan, you'll have to pay the interest (or it will be capitalized), but you won't have to pay the principal until after the grace period.

Repayment will occur through the institution from which you got the loan.  They will have specific details on where to send the payment, etc.

That's the basics of the Federal Stafford Loan.  If it seems like something that could work for you, talk to your lender or visit www.staffordloan.com.  If the Federal Stafford Loan doesn't seem like something that will work, try one of the other Federal Loans: the Perkins, or PLUS loans.