When checking out student loans, there are several different ones from which to choose. The Stafford student loans are loans that can be either subsidized or unsubsidized. Subsidized means the interest is paid by the government; unsubsidized means that you pay the interest. As of 2006 the interest rate for an unsubsidized Stafford student loan is fixed at 6%. For loans secured between July 1st 2007 and June 30th 2008 there will be a 1% federal default fee and a 1.5% federal origination fee. Some lenders will help you pay this fee.
The Stafford student loans you receive come in two ways: if you are a dependent, your loans are based off your parent’s income; if you are on your own, the Stafford student loan is based off your income. As a dependent, the loans are set at $3500 for the first year of school, $4500 for the second year and $5500 for your junior and senior year. If you are on your own and rely on your own finances, it will be $7500 for the first year, $8500 for the second year and $10500 for your junior and senior year. For those who are independent, these amounts will be greater than the cost of tuition. It is wise to either use the money to help with your tuition or make sure you pay back the excess to the lending institution.
If you are recognized as a dependent, the limit of your loans will be set at $23000; if independent, the limits are set at $46000. Either way, you can see how large your debt can be at the end of four years of college if you used all the money. You can offset this potential debt by applying for grants and scholarships. It is advised that you not rely entirely on student loans; in fact, you should not take them out if at all possible. If you should have any money left over from a check, and you will not need it to pay daily expenses, return it to the loan company and have it put toward the principal.