Stafford loans are low interest, fixed- rate loans available for assistance of college/university students with the costs of tuition and other school related expenses that come with attendance. A big benefit of Stafford loans is, unlike most loans, there are no credit checks done in determining eligibility for the loan, so even students with bad credit are able to qualify for these loans.It is rare to find student loans for students with bad credit at a low interest rate. It is therefore a good option for students with bad credit and should be one of the first they apply for.
Other Stafford loan advantages for students with bad credit
Another benefit is that loan repayment is not required while still attending school. Loans are available for undergradute and also graduate or professional students. There is an interest-free Stafford loans (subsidized) and another where interest is calculated on the loan(unsubsidized). The money for the loan will be sent in installments directly to the school who will use it to cover the school related charges and a cheque for the remaining amount will be prepared in the students name.
Disadvantage of loan for students with bad credit
The main disadvantage of the Stafford Loans is that it covers a relatively small amount of cost for the student. Students usually have to look for other loans so as help cover the cost of school. Private loans can also be looked into to help cover the cost of college. Private loans for students with bad credit usually come with much higher rate than the Stafford Loans. Limits for these loans are usually lower for students with bad credit than students with good credit and generally the number of loan options available to students with bad credit will be smaller than those with good credit so it may take more time but loan options are available for students with bad credit.
Subsidised Stafford loans
This is an interest free loan given to students based on financial need. The school will have a look at the student's FAFSA loan application and determine how much money that can be borrowed by the student. The loans remains interest free while the student is in school as long as they are in school at least half time or during a period of deferment
Unsubsidised Stafford loans
These loans are not based on financial need but the school still determines how much can be borrowed . Interest accumulates on these loans from the first payment to the school. Repayment of loans is not required while in school and can be delayed up to 6 months after graduation.
Limits for Stafford Loans
Loan limits are the maximum amount of money that can be borrowed . Limits for loans are usually lower for students with bad credit that those with good credit. Loan limits will also be greater for an independent student than a dependent student. Loan limits will increases as the year of study increases, so a first year student will typically have a smaller amount of money loaned to them than a student in third year. The loan limits quoted below are a total of maximum amount that can be obtained from both subsidized and unsubsidized loans. For example for a first year student with a loan limit of $5000, the maximum amount that can be borrowed for a subsidized loan would be $3500 and for an unsubsidized loans is $2000.
Loan cancellation/waivers
You can get your Stafford loan cancelled if you teach full-time for 5 years at a school or education agency which caters to low income families or after you can get a forgiveness on your loan balance when you take particular jobs at a public school and you have made 120 payments on your loan.
Interest Rate on loans
These are relatively low for loans given to for students with bad credit. For undergraduate loans, the interest rate for the academic year 2010-2011 is 4.50% while in 2011-2010 its 3.4%.Graduate staffod loans,on the other hand, have a rate of 6.8% until 2013.
