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?

SavvyFinancialLatina

If you enjoyed this post, please consider subscribing to the RSS feed , twitter, or leave a comment below!

9 comments

  • I just learned about this a few months ago when I learned I would be taking out loans. I don’t qualify for unsubsidized loans since I “made too much” last year, which I think is ridiculous since I won’t even have a job during school! I would NOT recommend taking out the max amount, that’s for sure. I took some out for my stafford loans but since the max is 20k, I needed more (tuition is 43k a year) so I applied for a Grad PLUS loan. The max amount they offered me was $45k but I only requested $27k. I’ll be writing a post about it soon!

  • Don’t go for max amount! That’s what I did and I am suffering from it. And of course, start paying if you can (that’s what I wish I would have done!).

    • How much did you take it out initially? How much interest do you think your going to end up paying?

      • I ended up taking the max every single year–I now have roughly $55,000 in student loans. I can’t caluclate the interest for all of them as I’m still working to fix past mistakes.

        • Did you use all your loans to pay off tuition, or was it for other expenses during college?

          I am sorry I am asking so many questions, but I find it interesting what people spend money on during college. I know that I could have done a better job of keeping track of my expenses. I could have saved my parents some money.

          • They were used to pay for tutuion, rent (I lived off campus but still shouldn’t have done this!), books and bills/food for the most part. And yes, if I would have tracked expenses, I could hae saved myself some money. I don’t mind the questions!

          • I didn’t have loans, because my parents helped me and scholarships. But sophomore year, I asked for an increase in my monthly allowance, it went from $300 to $400. I wish I had not asked for that increase in allowance. I started to eat out more, etc.

          • I didn’t have loans, because my parents helped me and scholarships. But sophomore year, I asked for an increase in my monthly allowance, it went from $300 to $400. I wish I had not asked for that increase in allowance. I started to eat out more, etc. I feel like the more money you have, the more you spend.

Leave a Reply

Your email address will not be published. Required fields are marked *

CommentLuv badge