Direct Stafford Loans: Types of Loans and Instructions for Borrowers

Direct Stafford loans are loan products for student borrowers offered directly by the federal government under Direct Loan Program. Today more and more students prefer them as a primary funding source.

There are 3 types of federal student loans that include: Perkins, Stafford and PLUS loans. The Perkins loan is designed for students with high financial need. PLUS loans are loans for parents of dependent students and professionals. And the Stafford loans are loans available for both undergraduate and graduate students with financial need or without.

The reason why Stafford loans are popular is simple, they satisfy needs of all borrowers. It happens because there are Subsidized Stafford loans and Unsubsidized Stafford loans. In other words, there are two subtypes.

Subsidized Stafford loans available to needy students. For this category of student borrowers, the government (subsidizes) pays the interest during in-school, deferment and grace periods. This loan type is designed for students from low-income families and the government is helping them by paying the interest for them.

Unsubsidized Stafford loans are the most popular because are open for students who have no financial need. Almost each student can qualify easily. However the borrower is responsible for the interest repayment and must pay it during in school periods. Thus, there is a difference between subsidized and unsubsidized Stafford loans that lies in the responsibility of interest payment.

Strong Sides

The best thing about federal loans is that they are dealing with need-based criteria. However some of them are non-need-based loans too. As an instance, Unsubsidized Stafford loans are not based on financial need. However it’s not required to have a perfect credit history or a cosigner to apply successfully (except PLUS loans).

If you want to apply for private student loans and you have bad credit, then your application won’t be approved. Bad credit borrowers have no chance to receive private funding. The solution is to apply with a credit-worthy cosigner.

So the ability to not having cosigner and ideal credit score makes the Direct Stafford loan the best option for a student aiming to find affordable college funding.

But How Could I Apply for Stafford Loans?

To apply for Stafford loans you need to submit the FAFSA form. FAFSA stands for Free Application for Federal Student Aid. It’s important to fill out all graphs properly and answer all questions in the form. You can apply online or print the template and then send it by mail.

Then the FAFSA form is sent to schools you list in the form. And schools use the information to determine amount of funding available to applicants.

Also there is a document a borrower needs to sign that is called a Master Promissory Note (MPN). This document contains all the information about terms. So, do make sure to read it carefully.

There are various forms of student loans available: from federal financial aid options to alternative loans by private lenders. However whatever a student is going to do it’s good to remember that being well informed is a turning point allowing to save more and get more funding.

Morris Johnson is a popular student aid expert. If you want to know more about federal loans and it’s servicing like great lakes student loan servicing, please, visit the official site and the section about student loans and no cosigner.

Comments are closed