What Are Federal Stafford Student Loans?

Federal Stafford Loans - No Collaterals, No Credit Checks

Most college students who are in need of financial aid get federal Stafford loans as one of their financial aid options. Why do students find

that federal direct student loans are such a good option when seeking financial aid? How can you apply for federal Stafford student loans?

What is a Federal Stafford Loan?

A federal Stafford loan is one of the most flexible financial aid options for college students. Federal Stafford loans actually refer to two loan programs, the Federal Family Direct Loan Program and the Federal Direct Loan Program. Most schools choose one program or the other in which to participate. The student will qualify for the loan based on their need as determined through the FAFSA application.

Federal Family Education Loan

The Federal Family Education Loan Program, or FFEL, is one of the versions of the federal Stafford student loans. With FFEL loans, the student borrows the funds from a lending institution, and not directly from the federal government. You repay the loan to the institution that you borrow it from. The loan could be through participating credit unions, banks, savings and loan associations, or other lending institutions, that have chosen to participate in the student loan program.

Federal Direct Student Loan

Federal direct student loans are borrowed directly from the federal government. The government funds the direct federal student loans through the US Department of Education. The student will pay the government back for the balance of their loan.

Subsidized vs. Unsubsidized Stafford Loans

When choosing your federal Stafford loans, you have two options. You can have either federal subsidized Stafford loans, or unsubsidized Stafford loans. What you choose will depend on the results of your FAFSA. The amount of money that you are qualified to borrow based on the results of your FAFSA can be in the form of a subsidized loan. A subsidized loan is a loan where the federal government actually pays the interest the loan is earning while you are attending school, and for the first six months after you graduate.

If, however, you do not qualify for subsidized loans, or if your subsidized loan amount is not sufficient to pay for your education, you can also apply for unsubsidized loans through the Stafford loan program. In this case, you are responsible to pay the interest the moment you start receiving the loan, and the federal government will not help with loan payments. In many situations, you can receive both subsidized and unsubsidized loans at the same time.

Why Choose Stafford Loans

Stafford loans are one of the most popular student loans from federal sources. Part of the reason for the popularity of the Stafford loan program is the fact that the with subsidized loans, the student gets six months after graduation before they have to start paying back the loan's interest. Another reason for the popularity of the Stafford loan program is the fact that the interest rate is fixed.

Continue to: How to Get a Stafford Loan

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