What are the pros and cons of Federal Stafford loans?

Pros and cons of Federal Stafford loans

Stafford loans play a major role in affordable financing for post-secondary education. Like any other product, Federal Stafford loans are not perfect. They have both good and not so good features. Here is a brief summary of each.

Pros of Stafford loans:

• No credit checks. The loan is guaranteed (or in some cases made by) the Federal government so credit scores are not examined.
• Low fixed rate interest rates. Typically, below “market” interest rates are offered and apply to the entire term of your Federal Stafford loans.
• Wide choice of repayment plans. Stafford loans offer repayment terms that are very flexible, including the ability to choose a payment that fits your budget and allowing you to consolidate multiple loans into just one for your convenience.
• Repayment is deferred during student enrollment. No repayment is required while the student is enrolled in school.

Cons associated with Federal Stafford loans:

• Often insufficient loan limits. In light of current post-secondary education costs, Stafford loans have low limits. It is rarely possible to generate sufficient financing to pay contemporary tuition costs.
• Must file a FAFSA (Free Application for Federal Student Aid) to be considered. A FAFSA sometimes poses a challenge to prospective students and parents alike.
• Typically need multiple loans. Students must apply for Stafford loans every year for which they need financing, which results in generating multiple loans and payments when your education is complete.
• Restricted ability to use the funds. Your Federal Stafford loans are processed and collected by your school. They are used for tuition, books, lab fees, etc. The borrower (student) has little ability to direct the use of these funds.

Stafford loans are not perfect, but offer excellent rates and terms to help you fund your post-secondary education cost.