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The Federal Stafford Loan is a private lender, state/private guaranteed loan backed by the federal government. Interest rates are low. What is the difference between the Subsidized and Unsubsidized Stafford Loan? With a Subsidized Stafford, the interest is paid by the government while you are in school. The interest on the Unsubsidized Stafford is not paid by the government while you are in school. You have the option of paying the interest or deferring it until after you stop attending school, at which time it will be added to the principal of the loan. Why do I have to wait 30 days to get my loan when I applied early? This regulation applies to first-time borrowers to ensure that enrollment has been consistent before the loan amount is disbursed. EFT is Electronic Funds Transfer, which is used by lenders to transfer Stafford and PLUS loan proceeds from the lenders to the schools without the need for individual checks. This method of disbursing loan funds does speed up the time between receiving funds in the Financial Aid Office and the student actually having access to the funds. Planning ahead is essential to managing debt. If you plan to borrow each year you are in school, estimate the total amount you will borrow. Then use a sample loan repayment table to calculate how much you will have to pay each month. To decide how much to borrow, you can use the criteria lenders use when they consider an applicant's ability to repay: the total monthly payment for all debts should not exceed 8% of your gross monthly salary. A change in career goals, the loss of a job, or other unexpected changes in your situation could make repaying your loan more difficult than you expected. In some cases, and at the lender's option, you may be permitted to temporarily stop making payments, or to make smaller payments. This is called a forbearance. The promissory note for each loan you borrow outlines the specific terms under which you may be granted a deferment. Contact your lender for more information. What happens if I don't pay back my loan? Not paying back your student loan can have serious consequences. If you go into default, your lender can require you to repay the entire amount immediately, including all interest plus collection and late payment charges. The lender can sue you and can ask the federal government for help in collecting from you. The Internal Revenue Service may withhold your income tax refund and apply it toward your loan. You cannot get any additional federal student aid until make satisfactory arrangements to repay your loan. Also, the lender may notify credit bureaus of your default. Being delinquent or being in default can affect your credit rating, which will make it difficult to obtain credit cards, car loans and/or a home mortgage loan. How can I find out my credit history? Since approval of some non-need-based student loans and most parent loans is based upon credit history, you may want to order a credit report if you will need to finance a part of your family share. Check the report closely for accuracy and resolve any erroneous information prior to applying for educational loans. Return to TOP.
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