Does Stafford Student Loans Cover the Cost of Education?
Stafford student loans are the most popular used aid package for financing college. It is available to all students who attend accredited schools. The advantage of stafford student loans is rate and terms:
- stafford student loans rates are fixed and lower than other college aid packages
- stafford student loans do not require a credit check or collateral
- stafford student loans have repayment terms of 10 years; under consolidation, terms can be extended to 20 and 30 years depending on the amount being consolidated
The disadvantage of stafford student loans is the loan amounts available. The total amount available for undergraduate students in the 1st and 2nd year does not cover the cost of education. The loan amounts are also subject to the student’s dependency and independency status. Dependent undergrad students get even less when they apply for stafford student loans:
Aggregate Annual Loan Amounts for Dependent Undergraduate Students
- First Year: $3,500
- Second Year: $4,500
- Third Year and Beyond: $5,500
Aggregate Annual Loan Amounts for Independent Undergraduate Students
- First Year: $7,500
- Second Year: $8,500
- Third Year and Beyond: $10,500
The annual loan amounts will barely cover the cost of tuition, not to mention housing, food, transportation, recreation and other related college expenses. With the average costs for college ranging from $16,000 to $35,000 per year (depending on which university you attend), you can see why Stafford student loans pay for only a part of the total academic cost.
So What Should You Do
- First Step: Start with a Budget Plan
all students should have a budget plan for school. The plan lists the financial aid options you have for the academic period and the month-by-month spending plan.
Budget plans help students understand where they need to save and reduce daily spends in order to stay within limits.
You can estimate and budget these expenses by month using our FREE college budgeting worksheet. Link to our budgeting module for our guide and worksheet.
- Get All of the Stafford Student Loan Money You Can Get
you may require multiple financial aid sources to help pay for school. So start by getting all of the stafford student loan amounts that you can get. It may not be much, depending on your status and grade level. But every dollar counts.
- Look for Other FREE Financial Aid Options
there are FREE financial aid options that can help pay the cost of education. The most popular FREE option is scholarships. Another is work-study and other college aid. Another is community service. So complete a thorough search of ALL available aid options.
- Keep Tally of Your Financial Aid Sources
you may be using scholarships, college aid, stafford student loans, work-study, and other aid sources to pay the full cost of education. Keep track of that information regarding aid amounts, sources of aid, aid provider name and address, aid terms, etc. It will come in handy for successive years when you need new aid and when you need to consolidate loan amounts upon graduation
- Use Private Student Loans to Close the Gap
if you need additional money to make up the difference between the costs and aid received, consider using private student loans to close the gap.
You can borrow up to up to the full cost of education to pay tuition, housing, computer, and other related college expenses not covered by college aid and parent contributions.
Private student loans are a great resource when you need extra money. Sometimes your college and personal aid will not cover the full cost of education after your run your budgeting analysis. That is when you turn to private student loans to make up the difference from the cost of education and the amount of student financial aid that you have.
- Step 3: Use Pre-Paid Credit to Manage Your Money
pre-paid credit is one of the best money management tools for students on tight budgets. Pre-paid credit works exactly like credit cards except for one thing — the amount you can spend with the card is dependent on the amount you load to the card.
That is a key advantage. You can budget what you want to spend by week or by month and load that amount from your student funds to the card. You can then use the card to buy food, supplies, recreation, etc., and limit your spend to the amount loaded.
Stafford student loans may not cover your full education costs. But they are a great source of aid to have in your pocket when considering the aid options you need to attend school.