Stafford Loans 101
As you may know, I am going back to school in the fall to finish up my MBA. I have 3 classes left in my program and I am super excited to finish! Being this close but not finished yet, is awful. I am taking two classes in the fall, and one in the spring. I am spacing it out so that I won’t be too stressed!
While I was checking out my tuition bill and scholarship information, I noticed that I had an offer to accept an Unsubsidized Stafford Loan. The loan was for about $12000. I immediately declined it because I don’t need the loan. Thankfully, I will not need to borrow to pay for these last three classes. However, I realized even though I had constantly heard about this loan, I did not actually know the exact details.
Here is a summary of my detective work….
An UNSUBSIDIZED Stafford Loan is a federally guaranteed loan that is not based on financial need. Interest will accrue from the time the loan is disbursed to the school. You do not have to make interest or principal payments until six months after graduation, or six months after you drop below a half time status. You can borrow up to $12,000 per year depending on degree status and years in school. Fixed interest rate varies depending on when you started, but right now it’s at 6.8%. Only U.S. citizens, permanent residents, and eligible non citizens are eligible for this loan.
A SUBSIDIZED Stafford Loan is a federally guaranteed loan based on financial need. Interest does not accrue on the loan while you are in school at least half time, or during any future deferment periods. The federal government “subsidizes” (or pays) the interest during these times. Additionally, there are maximum amounts you can receive per school year.
The main difference is when interest starts accruing. You can always pay off your loans early without paying any penalties.
If you are a college or graduate student, make sure you know if you have subsidized or unsubsidized loans, the interest rate, and when you need to start paying the government back.
Do you have experience with these types of loans? Any advice to soon to be college students? Would you recommend taking out the max amount in loans?