What Is A Stafford Loan?

There are two different kinds of Stafford Loans and both are administered by the U.S. Department of Education. The first is called the Federal Family Education Loan (FFEL) Program and the other one is called the William D. Ford Federal Direct Loan (Direct Loan) Program.

For either type of loan the terms and conditions are very similar. And the amount that you choose to borrow can be the same from the Direct Loan or the FFEL lender.

For either type of Stafford Loan application, you fill out a Federal Student Aid Application (FAFSA). Then you present it to your school for a review. After it is processed they will inform you about your results and loan eligibility.

If you are accepted for one of the loans you will be asked to sign a promissory note that lists the conditions under which you are borrowing the money and the terms under which you agree to repay the money.

For both of the Stafford Loans you will be paid through your school in two installments. No installment will exceed one-half of your loan amount. The money first must be applied for tuition and fees, (room and board in some cases) and other mandatory school charges.

If any money is left over, you will receive the money, usually by check, to do as you wish unless you have given the school written authorization to hold the extra money until later in the enrollment period or next enrollment.

Here is where the two loans start to differ. First, if you choose a Direct Stafford Loan, the money will be coming from the federal government. And repayment will be made to the U.S. Department of Education.

If you go with FFEL Stafford Loan you will need to choose a lender. Your school will have a list of borrowers that you can choose from or you may have your own source such as your personal bank or credit union.

Also, there can be a difference between the loans when it comes to repayment. You have a choice of repayment plans for either loan. Your monthly payment will depend on the size of your debt and the length of your repayment period.

Before considering any loan it would be best to purchase the booklet or ask your loan provider for a copy of: Funding Education Beyond High School: The Guide to Federal Student Aid.

This guide explains repayment options, examples of monthly payment for different loan amounts and combining Stafford Loans with other available loans. It covers many areas you need to know when trying to manage your coming expenses.

Once you have graduated or leave school or drop your enrollment below half-time you will be given a six-month grace period before you have to start repayment on your loans. During this time you will receive information regarding your first payment due date.

You will receive all the information you need regarding repayment plans during your initial session when you apply for you loan. This can be either through your school counselor, bank representative or institution you go through to obtain your loan.