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Stafford loans
A Stafford Loan is a student loan offered to eligible students enrolled in American institutions of higher education to help finance their education.
Subsidized
For those students who are eligible, the subsidized Stafford Loan is recommended. This loan can be used to cover a portion of the student’s cost of education. The primary benefit is that the U.S. Department of Education pays the interest that accrues on this loan while the student is in school or during any deferment period.
The student qualifies for deferment if he/she is enrolled at least half-time, based on the school’s definition of half-time status. The Department of Education will cover all interest charged during the period the student is enrolled at least half-time and for the six month grace period given to the borrower after graduation, dropping below half time or withdrawing completely. Further, if the borrower, while in repayment, should need to take out a deferment such as an unemployment deferment or because of a return to school (in-school deferment), the government would pay the interest during those periods, as well.
There are many reasons a student might qualify for a subsidized student loan. One might be if a student's parents' financial means are far less than what is required to cover their childs education. A student wouldn't be eligible to receive subsidized student loans simply because their parents refused to pay for a specific college for one reason or another. This student would have to find other options to pay for college such as scholarships and/or taking out a private student loan.
Unsubsidized
Unsubsidized Stafford Loans differ from subsidized Stafford Loans in that the student is responsible for all interest that accrues on the loan from the time of disbursement through repayment of the loan. Students have to be eligible for unsubsidized Stafford Loans however they are generally granted to most students with a maximum borrowing cap.
Interest accrued on an unsubsidized Stafford Loan can be paid at any time by the borrower while in school or during a period of deferment or forbearance to help lower the amount of monthly payments. We recommend paying on loans during these times! Remember… a small payment is better than no payment!
If you choose not to pay the interest as it builds up, it will be capitalized leaving you with a greater balance of loans to pay off following graduation.
