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Confused about Stafford UNsubsidized [#permalink]
24 Apr 2007, 05:17
What is the difference between a Stafford unsubsidized loan and a regular commercial loan? I'm guessing the interest rate is a bit lower than what you would obtain with a commerical loan, but is there anything else I'm missing?
The unsubsidized Stafford has no credit requirements because it is backed by the Federal government. As long as you haven't defaulted on prior student loans, you can still borrow even if your credit sucks.
Also in the future, you'll have opportunities to consolidate your loans - and once again there are no credit requirements for this type of loan.
Ok, I did some investigation--check page 8 of this Entrance Counseling website offered by the Feds (I guess you have to pass this test to get your federal loan).
The loan fee, or borrower origination fee, is another expense of borrowing a Direct Loan. The loan fee is subtracted proportionately from each loan disbursement. The loan fee charged for Direct Subsidized and Unsubsidized Loans is currently 3 percent of the amount you borrow. This fee will be reduced annually according to the following schedule:
(and then it goes on to say that next year, the fee will be 2.5%).
However, later on it talks about a 1.5% up-front interest rebate amount. (If you miss one of your first 12 payments, they add this back to your principal--you lose the rebate).
So the 2.5% origination fee less the 1.5% up-front rebate is where I get my 1% figure from. All of this looks to be done at the Federal level, so I would guess it applies to all students. But maybe some schools kick in that extra 1% to get rid of the fee completely. I dunno.