Federal Stafford Loan Benefits

Stafford loans are a form of federal student loan provided directly through a loan program. If a student is eligible, a Stafford loan can cover at least a part of the cost of college. In some cases, the loans can cover the full cost of college. The benefits of this type of loan depend on the individual student's ability to pay for college. The loan terms are based on the student's determined need, and needier students will receive more favorable terms.

Subsidized Loans Have No Interest

There are two main categories of Stafford Loans: subsidized and unsubsidized. Subsidized loans are no-interest loans available to students who are determined to meet the need-based criteria. Students fill out a Free Application for Federal Student Aid (FAFSA) to determine if they are eligible. Questions about family income and the costs of the school they have been accepted to will come into play. If a student does not qualify for a subsidized loan, the student may apply for an unsubsidized loan and pay an interest rate on the loan. The rates are set each year by the Stafford program, and they tend to be average interest rates for the industry.

Independent Applicants Receive More

The loan questionnaire attempts to determine an individual's ability to pay for college. The "Expected Family Contribution," or EFC, will come into play in this consideration. If a student is declaring 100% independence from family support, the student may receive more in financing through the Stafford loan than if a family is contributing. This means independent students will receive more aid and a better chance at receiving subsidized loans to ease the burden of paying for college without family support. 

Non-Credit Based

The credit score of an applicant will not come into play with a Stafford loan. They are distributed based on need alone, not based on ability to repay the loan or financial stability. As a result, even a person with low or no credit may be eligible for a loan at low to no interest rates. Most students will not have high credit scores at the time they are applying for loans. They have not typically been working for many years or have had a number of loans previously. In many cases, this will be the first loan a student applies for. Allowing for a need-based rather than credit-based system eliminates the need for a collateral or a cosigner.

Flexible Repayment Options

Stafford loans will offer the student deferral options and a number of different payment plans. The loans typically mature in 10 years. There are four main plans:

  • Standard Repayment Plans require a fixed monthly payment based on the principal and interest of the loan

  • Graduated Repayment Plans offer the change to pay low monthly payments in the beginning and more as income and age increases over time

  • Income-Sensitive Repayment Plans are based on yearly income and rise and fall with your income

  • Extended Repayment Plans help with large loans by offering a mix or repayment options and extending the life of the loan up to 25 years



Need a Student Loan? Click here!