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A Stafford Loan is one kind of student loan and is offered to eligible students enrolled in accredited American Institutions of higher education to help finance their education. In the Higher Education Act of 1965, title IV, the terms of loans is described. It guarantees repayment to the lender if a student defaults. The loans are guaranteed by the full faith of the US Government. These loans are offered at a lower interest rate than borrower would otherwise be able to get for a private loan. But there are strict eligibility requirements and borrowing limits on Stafford loans.
Students must first complete a FAFSA before applying for a Stafford loan or other financial aid. These loans are available to students from the United States Department of Education through Federal Student Loan Program or a financial intermediary through the Federal Family Education Loan Program. While the student is enrolled as a full or half time student, no payment is expected on the loan which is referred to as in school deferment. It continues for six months after the student leaves school either by graduating, dropping below half time enrollment or withdrawing and this is referred to as Grace Period.
These loans are available as subsidized and unsubsidized loans. Students are provided with subsidized loans which are based on demonstrated financial need. The interest of this loan is paid by the federal government while the student is in school, during the grace period and during authorized deferment. But for unsubsidized Stafford loans, students are responsible for all of the interest that accrues while the student is enrolled in school.
