Benefits of Unsubsidized Stafford Loan
At times a student may apply for all student loans options available and still realize that he/she needs more help. Such times he/she needs to think of Unsubsidized Stafford Loans. These loans are not awarded according to a student’s financial need. All students regardless of needs are eligible for Unsubsidized Stafford Loans.
The interest for Unsubsidized Stafford Loan is charged right from the moment the loan is disbursed to the moment the loan is paid in full. The advantage is that you can have the payments deferred until after you graduate by capitalizing the interest. By capitalizing the interest I mean that the interest payments are added to the loan balance increasing the size and cost of the loan and hence the paying period is extended.
Most of the students combine the subsidized loans with unsubsidized loans to borrow the maximum amount permitted each year. Like starting 1st July 2007, Stafford loans allow dependent undergraduates to borrow up to $ 2,625 and $ 3,500 their freshman year, $ 3,500 – $ 4,500 sophomore year and $ 5,500 for each remaining year. The good news is that independent students and parents turned down for a PLUS loan can borrow an additional unsubsidized $ 4,000 the first two years and $ 5,000 the remaining years. There are other specified amounts for graduate students and cumulative limits for undergraduate. It is good to look for more information and see these amounts to understand what I am talking about.
It is worth noting that for you to be eligible for unsubsidized Stafford loan you need to fill in the FAFSA form, submit it and be accepted. You need to fill the FAFSA form as early as possible to avoid rushing with the deadlines.
While there are many alternatives to help you fund your education, Unsubsidized Stafford Loans are the kind of loans that you will find with very low costs and manageable interests. Therefore go for the Unsubsidized Stafford Loan and enjoy the benefits.
Poly Muthumbi, a Web Administrator, Has Been Researching and Reporting on Student Loans for Years. For More Information on Unsubsidized Stafford Loan, Visit Her Site at UNSUBSIDIZED STAFFORD LOAN
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Help answer the question about stafford loan
How do Loans work? Why do I have to apply for a Federal Stafford Loan Note first? How important are deadlines?I'm applying for a Loan. A federal Stafford Loan. Im concerned that I might not get it because the deadline passed since I had to reapply for a Pin number needed to apply which took 7 days to arrive at my house, 2 days past the deadline. Am I screwed? Why is it recommended that I use this kind of Loan. Does it matter?
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Poly Muthumbi is a Web Administrator and Has Been Researching and Reporting on FINANCE for Years. For More Information on STUDENT LOANS, Visit Her Site at ONLINE FINANCIAL PORTICO
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It sounds like you have done your homework. But sorry, private student loans are evil. Go with the PLUS loan.
It will not cost you more money in the long run if you choose private. Haven't you heard of the subprime mortgage crisis? That was caused by the ever growing popularity (and abundance of folks not knowing any better) of variable interest loans.
Besides, the first thing that will happen when you graduate is they'll convince you to "consolidate" your loans. Making those payments stretch out to 30 years or more. Trust me, they aren't doing it because they love you, they are doing it because they will get even more of your money. 5.5% is low… for now, but if you pay that over a 30 year period, it will be more than what you would pay for PLUS loans over a 10 year period.
Not to mention if you already have federal loans, you can't consolidate federal and private together… meaning what?? You'll NEVER have just one payment.. kinda defeating the whole reason for consolidation in the first place.
What else, oh, on a private loan if you die or become disabled, your cosigner will still have to repay the loan. Would you really want to do that to someone? Another, one mix-up on your banks auto-pay feature and a resulting late payment on your private student loan and your interest will skyrocket. Ouch!
Read the terms carefully… 5.5% may go to 15% or 20% or 32%, you never know unless you read the fine print because they are unregulated and unmonitored. If you do find a clause that says it will only go to 9%, that doesn't mean they can't change it later, because again – they are unregulated.
Some private loans (not sure if citi is one of them) will have prepayment penalties as well. Think of this as still being required to pay back the interest for the remaining time on your loan, despite paying it back early. ouch!
Sorry for the soap box dude, but you asked… on YA!
Amanda:
Let's see if I can help you get a little less overwhelmed – what do you say?
First of all, let's start with the easy question – subsidized or unsubsidized.
When a loan is 'subsidized', that means that the federal government will pay all of the interest that accrues on the loan, for as long as you remain in school – and for 6 months after you leave school. If you know anything about how loans work, you know that interest is applied to your balance every month, and either you must pay that interest as it becomes due every month, or it gets added to what you already owe.
With a subsidized loan, the government is doing just that for you – paying the interest as it becomes due every month. What's that mean? Well – it means you're going to save a lot of money. If you let the interest pile up, unpaid, you'll find that you owe a lot more than you started out owing, by the time you get out of school, and start paying your loans back in a few years. With a subsidized loan, you'll owe exactly what you borrowed, and nothing more. This could potentially save you several thousand dollars.
You don't get to choose whether you want a subsidized loan. The subsidized loans are a special form of financial aid that your school can only offer if you qualify. There is a $3500 limit to the total amount of subsidized loan you can borrow in your freshman year, so if your school is offering you both a subsidized and unsubsidized, they believe that you're going to need both. If you agree, take them. The total of both Stafford loans can't exceed $5500 this year. Next year, you'll get to borrow a little bit more.
If you were offered Stafford loans (either type), your school will provide a list of recommended lenders, but you don't need to choose one of those. However, because the Stafford loan is a government program, all of the participating lenders make those loans according to the same basic terms – you won't find much difference from one lender to the next.
The government allows participating lenders in the Stafford program to charge you lending fees that are supposedly related to the lenders' cost of making these types of loans. That's your origination fee.
The government also charges you a small amount for "insurance". With any Stafford loan, the government guarantees the lender that the loan will be repaid. To make that possible, the government charges every borrower a small fee for guaranteeing the loan – that's your guarantee fee.
Those won't differ from lender to lender. Both fees will be subtracted from your loan before it gets sent to the school.
Don't confuse a Stafford loan with the other major type of educational loan – those are known as "private" or "alternative" loans. Thanks to the government's guarantee of the Stafford program, the lenders are more than happy to trust you with their money – they won't ask you for information on your income, or your debts, or your credit history. Private loans are not guaranteed, and therefore, the lenders will only make those kinds of loans to borrowers that can satisfy their very conservative lending policies.
Chances are that you will not be approved for a private loan unless you can provide a cosigner.
When you are choosing your Stafford lender, be sure that you're applying for a Stafford, and not a private or alternative loan.
Perhaps the only differences you might find with the lenders on the Stafford is that some of them will reward you with a small interest rate discount if you sign up for the auto-debit payment program. With that arrangement, the lender will automatically deduct your payment from your checking or savings account every month. That gives them security, so it's worth their while to offer a discount in order to entice you to sign up. Don't worry – your payments won't be due until 6 months after you leave school – it will be a long time before your lender starts making its withdrawals.
One more difference to look for, but it's a little complicated. You'll want to see how many times each lender says it will "capitalize" your interest. In the simplest way of looking at it, "capitalization" is when the lender adds the interest to the balance of what you owe. Lenders who only capitalize your interest one time would be preferable to lenders who capitalize it more frequently. Again – it's a little complicated, and it won't apply to your subsidized Stafford, because remember – the government will be paying that interest for you, anyway.
Good luck – I hope this helped you understand.