Unsubsidized Stafford Loans

Due to the rising costs of higher educations these days, many students are choosing to fund their schooling with the use of education loans. The most common type of education loan by far is the Stafford loan. There are two types of Stafford loans. Subsidized Stafford loans allow the student complete freedom as the government pays the interest payments while they are in school. Subsidized Stafford loans are only awarded to those persons that can demonstrate a financial need for the loan. In this article we will discuss the details of the most common loan offered; the unsubsidized Stafford loan.

What is an Unsubsidized Stafford loan?

There are two different types of unsubsidized loans on the market. They are:

- Federal Family Education Loan Program (FFELP) loans are provided by private lenders, such as banks, credit unions and savings & loan associations Citibank Student Loans is one example of a private lender offering FFELP loans. These loans are guaranteed against default by the federal government.

- Federal Direct Student Loan Program (FDSLP) loans, administered by "Direct Lending Schools", are provided by the US government directly to students and their parents.

Principle Payments Of Stafford Loans

With the unsubsidized Stafford loan, you can put off the principle payments until after graduation by capitalizing the interest. This adds the interest payments to the loan balance, increasing the size and cost of the loan. Anyone, regardless of need, is eligible for the unsubsidized Stafford Loan. The Federal Reserve sets the maximum interest rate that can be applied to a federally backed student loan. On the other hand, they do not set a minimum rate. This friendly competition amongst lending institutions creates a great situation for students looking for a loan. With the extremely low interest rates available, now is the time to the education you have been dreaming of.