A loan offered to eligible students enrolled in accredited united States institutions of higher education, Stafford loans ultimately guarantee repayment to the lender or provider should the student default on their studies. Previously known as the Federal Guaranteed Student Loan program, it was renamed in 1988 by Congress in honor of the US Republican Senator from Vermont, Robert Stafford – due to his endeavors and hard work towards improving the standard of higher education throughout the United States.
A lower interest rate than made available from private loans – accompanies these Stafford loans purely because they are guaranteed by the full faith of the US Government. However strict eligibility requirements are placed on these loans, as well as borrowing limits.
The funds are allocated through the completion of the FAFSA (Free Application for Federal Student Aid) application process that all students seeking some form of financial aid through education must complete. The student in question is not required to commence repayments whilst they are enrolled as either a part time or full time student. Deferment of this repayment schedule is held for up to six months post graduation and is also known as the grace period.
These Stafford loans can take the shape of being subsidized by the US Government or being non-subsidized. The main difference being that it is the interest on repayments that is paid for by the federal government at least while the student is enrolled in education, and then the interest payments become the sole concern of the student post education.
Since july 1st 2006, all Stafford loans made available to US students are issued with a fixed interest rate. This rate of interest is currently at 6.8% with a view to being amended to match the current financial climate in July of 2012.