| Stafford loans were established by Congress in 1965 | | | | adjusted gross income of less than $50,000 per year. |
| as part of the FFELP (Federal Family Education Loan | | | | A further 25% are awarded to students whose |
| Program) to provide financial aid for students. They | | | | families fall into the $50,000 to $100,000 per year |
| were originally intended to help student who were 'in | | | | range. However, the definition of 'in need' is still very |
| need' but just what was meant by the term 'in need' | | | | flexible and about 10% of subsidized loans are given to |
| was not entirely clear and the program was rapidly | | | | students whose combined family income is in excess |
| expanded. Today, Stafford loans account for more | | | | of $100,000. |
| than 90% of the $50 billion dollars plus which is | | | | If a student does not qualify for a subsidized loan then |
| distributed each year to the various FFELP programs. | | | | he or she will normally be eligible for an unsubsidized |
| One way in which the definition of 'in need' was quickly | | | | Stafford loan. In this case interest due on the loan |
| broadened was to create two different forms of | | | | accumulates from the day the loan money is disbursed |
| Stafford loan - subsidized and unsubsidized. | | | | until the day that the loan is paid off and interest |
| In the case of subsidized loans, the Federal | | | | charges can build rapidly. For example, even in we |
| Government pays the interest charges which would | | | | take the case of a modest $5,000 loan, at 6.8% the |
| ordinarily accrue from the date on which the loan is | | | | first year's interest charge is approximately $430 and |
| originated until payments start. Usually, no payments | | | | this is added to the $5,000 with further interest |
| are made while the student is attending school (as long | | | | charges being applied to the higher figure in |
| as the program is a half-time program or greater) and | | | | subsequent years. |
| for a further six month grace period after completion | | | | Trying to work out interest payments can be a |
| of the course. Students can however request that | | | | complicated business, especially if you have a series |
| payments begin earlier if they wish to start repaying | | | | of different loans taken out over two or three years in |
| their loan before the usual date. | | | | college, because, while interest is quoted as an annual |
| Because the government pays interest on these loans | | | | figure, it is calculated monthly and added to the loan |
| they are normally need-based in that aid officials will | | | | principle as you go along with interest in subsequent |
| look at a student's family income when deciding | | | | months being charged on the increasing figure. A good |
| whether or not to grant a loan. In making their decision | | | | approximation can be made however by using one of |
| a number known as the EFC (Expected Family | | | | the many freely available online mortgage calculators. |
| Contribution) is used and this is obtained from income | | | | From the example above it should also be noted that |
| information provided on the FAFSA (Free Application | | | | $5,000 is a very low figure as student loans go and |
| for Federal Student Aid) application form. | | | | that most students will borrow considerably more than |
| About two out of every three subsidized Stafford | | | | this. |
| loans are given to students whose parents have an | | | | |