Simple Facts About Direct Stafford Loans

The Federal Stafford loan is a low-income loan offered for students directly from the U.S. Department of Education through Direct Loan Program (DLP). Direct Stafford loans are the most popular form of federal financial aid today.

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 popularity of Federal Stafford loans is achieved owing to existence of two types: Subsidized Stafford loans and Unsubsidized Stafford loans. Each type has own features and typically they are vary by lender's specifics.

Subsidized Stafford loans are loans for students who demonstrate significant financial need. In this case the government pays the interest while a student in school. It means that if a student borrows $10,000 he will repay the same $10,000 after graduation. This results are achieved because the federal government pays the interest – subsidizes – and do not allow it to accrue. This type of loan is perfect for students who live in families with low-income and who do not have money to pay for college themselves.

Unsubsidized Stafford loans are loans that are offered for almost all students regardless of financial need. The point is that the government doesn't pay the interest for a borrower. If a student borrows $10,000 he will repay after graduation the main sum of loan (in example $10,000) plus the interest. The government in this case doesn't subsidize the loan. It's important to understand how the process works and know the difference between two subtypes of the same loan.

Main Benefit

One of the main benefits of federal student loans is that they are typically need-based. A Stafford loan is not an exception. It does deal with need-based criteria. So, if a borrower has a bad credit score and doesn't have a cosigner – there are still good chances to qualify.

However dealing with private student loans the bad credit history can become a real problem. If someone doesn't have good credit score it’s necessary to have a cosigner with perfect credit score.

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.

Applying for Stafford loans

In order to apply for Direct Stafford loans it's necessary to complete the Free Application for Federal Student Aid (FAFSA). Owing to easy access to the internet more and more students today prefer to submit a FAFSA online. However another option of submitting a form via mail is also available. In this case a student has to print the form, fill it out and send.

After the process of sending a FAFSA is completed schools receive it. Schools use the information provided by a student in his FAFSA to determine how much money a student is going to receive.

It's important to know that when a student receives Direct Stafford loans for the first time – he or she must complete a Master Promissory Note (MPN). It's a legal document in which a borrower actually takes responsibility for loan repayment by singing the document. In other words it works like a contract.

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.