Subsidized Student Loans

As you read through the informative brochures and websites about education loans, you may notice that Stafford Loans are among the most commonly disbursed. There are two types of Stafford loans, and understanding the difference can mean a great deal once it is time to repay your loans. Subsidized loans are preferable in that they are interest-free, whereas unsubsidized loans are not. But what is involved in qualifying for subsidized student loans, and what does the process entail?

To understand subsidized student loans, you must first understand the way borrowing money works. To obtain most loans, you must submit to a credit check. Upon approval - which is based on a good credit history and not a negative or non-existent one - an interest rate is fixed, and payments become due immediately upon disbursal. In some cases, where most student loans are concerned, payments may only go toward the interest until the student graduates. A grace period may follow before payment toward the principal balance must begin being repaid.

With a subsidized loan, the borrower is not obligated to pay any interest because the federal government handles this portion of the loan fees with the lender. However, there are very strict rules by which the administration of subsidized Stafford Loans is governed, and not just anyone can be approved. The qualifications are as follows:

• As with all government funding opportunities, the Free Application for Federal Student Aid, or FAFSA is the standardized application form for determination of eligibility.
• Through the completion of the FAFSA, students must show that they are severely lacking in adequate funding for college based on a low Expected Family Contribution, or EFC.
• The student must be enrolled in at least a half-time college program to qualify.
• No credit check is required; therefore, students without credit history who can prove independence from a parent may be eligible; however, while parents with bad credit history are still eligible, having a high income disqualifies their student for subsidized student loans.

If you don't qualify for subsidized student loans, you can still obtain low-interest unsubsidized Stafford Loans and Perkins Loans, which will offer you savings in comparison to a personal or private loan from another lending institution.

Paying for school is not easy, but we are here to help. OEDb's student finance section will help you find the money you need to pay your tuition and other college expenses. We cover scholarships, college grants, and student loans. Scholarships and grants are both forms of "free money", meaning they don't need to be paid back. Scholarships are typically awarded by businesses or individuals, with the money being earmarked specifically for tuition. They can be awarded based on a student's location or by religious affiliation, such as Catholicism or Islam. Grants are typically awarded by governments or non-profit organizations and the money often can be applied to several different expenses a student may incur, not solely tuition. They can be awarded based on location or ethnicity, for instance African American or Hispanic. Loans are not considered "free money", because unlike scholarships and grants, they do need to be paid back after graduation. Common federal loans include Perkins and Stafford. Loans are also available by location.