All About Stafford Loans

Students are normally entitled to the student loans with low rates of payment along with deferment options. These loans are sanctioned without a credit check. Stafford loan is a very common student loan in the US. In order to be eligible for a Stafford loan, one must be a US citizen and his educational qualifications should consist of a high school diploma. The credit history of the student must be good and the institute where he has enrolled must be a recognized one. The loan can be availed by students pursuing undergraduate, graduate and professional courses.

Stafford Loans are funded by the government through the Federal Direct Student Loan Program. Various banks and credit unions too participate in loan disbursement. The Stafford can be either a subsidized or an unsubsidized one. In detail, a subsidized loan comes with the facility of payment of the borrower's interest charges by the government for the first six months along with deferment option after the school gets over. But in an unsubsidized loan the student has to bear the interest charges himself with the option of adding the interest amount to the overall loan balance. This process is called capitalization of interests. All the students have the eligibility to obtain an unsubsidized loan.

Again, it is heard that subsidized and unsubsidized loan scan be clubbed together. From July 1, 2006 it was decided that a fixed rate of 6-8 percent should be recognized as the interest. The amount of loan depends upon the borrower's dependency status and the course he is pursuing. Thus professional students would have greater amount sanctioned to them rather than the students who are pursuing graduation. There is a deduction of 4 percent from the loan amount as a processing fee. The repayment of this loan would start six months after the borrower has left the school. The upper time limit might be 10 to 15 years and this depends on the amount and the terms.