The Two Major Types of Low Interest Loans
We've established that the preferred type of low interest student loan is a Federal loan. Now let's concentrate on the two types of Federal loans that offer manageable low interest rates and repayment plans along with other substantial benefits to students struggling to finance their higher education.
Stafford Student Loan
The Stafford is a low interest Federal loan that is designed to help students with little to no credit afford college. The Stafford loan is intended as a supplement to the students own financial resources, scholarships and/or grant money. As a Federal student loan the Stafford uses different criteria in granting loan applications than a standard lender like a bank. Rather than basing your worthiness on a credit score, it is based on whether or not you fall within the eligible income bracket, if you are attending school at least half-time and if you have no history of defaulting on a loan.
The Stafford loan program offers subsidized low interest student loans to qualifying applicants. The interest rates for the 2011 – 2012 school year are currently as low as 3.4%. The Stafford program also offers unsubsidized loans depending on the students needs. These unsubsidized loans are currently offering fixed interest rates of 6.8%. Of course whether you qualify for a subsidized or unsubsidized loan will depend on your circumstances as determined by your FAFSA application.
The Stafford Federal loan program offers borrowing limits up to $20, 000 per year depending on the status of your degree and the number of years you have been in school. The Stafford also allows students to defer payment while they remain enrolled in college which means you can concentrate on your studies and give them your full attention. One of the prime benefits of the Stafford student loan program as it offers loan forgiveness programs for graduating students who perform public service or take up teaching posts in underfunded and low income schools.
