Federal Stafford loans to students are either subsidized or unsubsidized. A subsidized loan is awarded on the basis of financial need. The borrower is not charged any interest before beginning repayment or during authorized periods of deferment. The federal government "subsidizes" the interest during these periods.
An unsubsidized loan is not awarded on the basis of need. The borrower is charged interest from the time the loan is disbursed until it is paid in full. If the borrower allows interest to accumulate, it will be capitalized, that is, the interest will be added to the principal amount of the loan and additional interest will be based upon the higher amount. The borrower can receive a subsidized loan and an unsubsidized loan for the same enrollment period. A student must be enrolled in at least six credit hours to be eligible to borrow from the Stafford Loan Program.
Students planning to become teachers may be the interested in the Stafford Loan cancellation benefits for teachers. Borrowers may be able to cancel a portion of their Stafford Loans if they are teaching in a low-income school. To qualify, the borrower must work as a full-time teacher for five consecutive years in an elementary or secondary school that has been designated as a "low-income" school. The U.S. Department of Education each year designates low-income elementary and secondary schools, and a list of these schools, by year, is posted on the department's Web site. A full list of qualifying conditions and other information concerning repayment of loans may be found at the Federal Student Aid Web site, or from the college financial aid office.
Parent Loans for Undergraduate Students (PLUS) loans enable parents with good credit histories to borrow for the education expenses of each child who is a dependent undergraduate student enrolled at least half time. The yearly limit on a PLUS loan is equal to the student's cost of attendance minus any other financial aid he or she receives. Eligibility requirements include enrollment for at least six credit hours.
