Subsidized Stafford Loans are a source of big business and even bigger profits for many American lending institutions today. Let me explain: While the student does not pay the accumulative interest on the loan before he/she graduates, the taxpayers do pay for the accumulated interest. The Stafford Loan programs are Federal and come under Federal taxes. Banks profit from this because not only will they receive the interest that accumulates after the student has graduated, they also receive interest in interim, and during the time that the student's interest is deferred.
On the other end of the spectrum, Unsubsidized Stafford Loans require the student to repay interest during the loan term, but, in some cases this interest can be "deferred" until the student does begin making payments. This loan, however, is not one that banks will show you first, simply because they lose money. Neither the unsubsidized nor the subsidized loans hold any pro above the other; it's simply a matter of money for the banks involved.
On average a college undergraduate leaves school about $10,000 in debt. Most of which is required to begin repayment six months in the future. "Why?" you ask. Because college costs are rising astronomically and loans are becoming more and more needed, so students are more likely to take out loans when they don't receive the grants/scholarships/fellowships that they need. In turn, banks are able to charge a little more, work more with the government, and earn a little more money in the process. It is also important to note the other factors found in the NCHELP survey. There was an estimated total of $50.6 billion dollars available during the 1995-96 fiscal year from federal, state and institutional resources that increased by $3.3 billion when compared to the 1994-95 fiscal year. It is also noted that the largest increase in loan types were unsubsidized, simply because the student could defer the interest, and make payments only on the interest until after graduation. Keep in mind though, that a loan is not "free money" just because you have several years before you begin payment. You have to pay the loan even if you do not graduate, or if you fall below half time in your credit hours. Make sure you are aware of this before you make any sudden changes or decisions. This is something to keep in mind before you apply.
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