Pay No Interest on Your Student Loan
Low Income College Funding
Students who have high hopes of attending a college or university but severely lack adequate funding may be eligible for special subsidized federal loans. With a subsidized loan you do not have to pay the interest on the loan while you are in school. Why does this matter?
A loan interest rate is the percentage of the total loan amount. The higher the interest rate, the more it matters. The higher the interest rate the more you pay in the long run over and above the real amount you first borrowed. For example, when you take out a loan for $20,000 with a loan repayment term of 10 years, the truth is you will ultimately pay well over $20,000. How much more? Completely depends on the loan interest rate. It could be a few thousand dollars. When boiled down an interest rate is the price you pay for borrowing money from a lender.
Most Popular Subsidized Loan
The hands down most popular subsidized student loan: the subsidized Stafford Loan.
The federal Stafford Loans, subsidized and unsubsidized, are already the most disbursed student loans in the U.S. Nearly every college student that files a Free Application for Federal Student Aid (FAFSA) qualifies for Stafford Loans. And guess what? These financial tools pack really low interest rates. Thanks to the College Cost Reduction Act of 2007 Stafford Loan interest rates will be incrementally reduced from 6.8% to 3.4% by 2012. That’s a 50% cut.
How Can You Get a Subsidized Loan?
Subsidized student loans are only available through the federal government and are exclusively designed for low-income students.
How do you get a subsidized Stafford Loan?
First the only way you qualify for any type of federal student is to complete and file the FAFSA. This should not be a task you debate; this should be a given. Don’t try to decide if your family income would allow you to qualify, or procrastinate, or puff yourself up with pride and decide you or your parents can certainly pay for college without federal loans.
Just fill out the FAFSA and file it, why?
Because almost 8 million college-bound students fail to file a FAFSA every year many with reasons just like those mentioned above. Truth is of those 8 million FAFSA failures, 6 million would qualify for low interest loans and nearly 2 million of those would be eligible for Pell Grants 1—free gift money! You could be one of those 2 million, or you could qualify for subsidized Stafford Loans, but you’ll never know if you don’t file the FAFSA.
Repaying the Subsidized Stafford Loan
If you qualify for a subsidized Stafford Loan the federal government pays the interest on the loan:
- While you are in school.
- If you enter a period of loan deferment.
- During the six-month grace period that immediately follows graduation.
You take over loan repayment, of the principal and interest, after the initial 6 month grace period ends.
1 “Missed Opportunities: Students Who Do Not Apply for Financial Aid,” ACE, October 2004, accessed October 15, 2007, http://www.cherrycommission.org/docs/Resources/Participation/Student_FinancialAidArticle.pdf.
