What is the best way to borrow money for college? Should you take out a second mortgage or are the student loans offered at lower interest rates?
Answers | 1
The Stafford loan is the most common loan that students use to pay for college. If the student qualifies for a subsidized loan, the federal government pays the interest on the loan while the student is in college – hence the term “subsidized.” Almost any student can get an unsubsidized loan, with the difference being that the student is responsible for paying the interest on the loan while he is in college, although the interest payments can be deferred until shortly after the student graduates or leaves college. The amount of both types of Stafford loans for undergraduate students is based on the student’s standing in college. The maximum loan amount is $5,500 for freshmen, $6,500 for sophomores and $7,500 for juniors and seniors, with an aggregate maximum loan amount of $31,000 per student. For the current 2014-2015 academic year, the interest rate for Subsidized and Unsubsidized Stafford Loans is 4.66%, but is now a variable rate based on the ten-year Treasury note. The rate is capped at 8.25%. For more information on Stafford Loans, Parent PLUS Loans and Perkins Loans, visit the federal website Studentaid.gov.