Subsidized Stafford Loans
Many students incur huge debts as they attempt to pay for college. In 2012, for example, the average amount of debt carried by a U.S. college student stood at $27,253, according to an analysis published by Forbes. Often, this debt is considered worthwhile, as students who complete a college degree tend to have more employment opportunities, when compared to those who do not obtain an advanced education.
Even so, many students who take out big debts have some regrets about their decisions. For example, in a poll conducted by Fidelity, some 39 percent of students claimed that they would have made different college choices, had they fully understood the consequences of the debt they took out.
It’s possible that these students wouldn’t harbor regrets if they’d agreed to a subsidized Stafford loan (also known as a Direct Subsidized Loan). These loan packages come with attractive terms that could reduce the overall cost of college.
Direct Subsidized Loans aren’t free products. They are loans that students are expected to repay in time. But there are some special aspects of these loans that can be beneficial. Most of these benefits concern the interest fees a student’s expected to pay.
On the very first day that a student accepts money in the form of a student loan, the interest kicks in. The student might not realize that the loan is functional and generating revenue for the entity that provided the loan, but even so, there are fees and interest payments accruing, even while the student is in school. When a student graduates, the accumulated interest really could be immense.
Students who obtain subsidized loans don’t need to worry about those interest payments. As long as they’re enrolled in school and progressing nicely toward graduation, they won’t be required to pick up the tab for the interest payments.
Qualifying for a Subsidy
Obviously, almost any student would want to participate in a Direct Subsidized Loan program, as doing so could result in huge savings. But not everyone who wants a loan like this can get one. In fact, there are restrictions on who can qualify for a loan like this. Generally, these products are reserved for students who demonstrate financial need.
There’s no harm in applying for a loan like this, however, as some students who think they might never qualify are able to do so, and they’re also able to reap the rewards.
- Determining how much the student, or the student’s family, holds in assets
- Determining how much the school the student chooses charges in tuition
- Completing a Free Application for Federal Student Aid (FAFSA)
- Waiting for the results
Those students who qualify will be enrolled in the program with no extra paperwork required. Those students who don’t qualify might be given the opportunity to participate in unsubsidized programs, or they might choose to look for funding in the private marketplace.