There are many student loan products on the market today. Many years ago, there was a loan product from the federal government that was called the GSL, (Guaranteed Student Loan) That meant that the money that the student borrowed was guaranteed to the lender (usually banks) if the student defaulted on that loan.
Today the loans that are guaranteed to students regardless of financial need are called Stafford loans. There are two types of Stafford loans. The first are the loans administered by the schools with the federal government being the primary lender. Schools that participate in this Stafford loan program are called Direct Lending schools. The second type of Stafford loan is a loan where the student actually borrows the money from a participating lender, such as a bank or a student loan company. Schools that utilize this type of Stafford loan process are called FFEL schools (Federal Family Education Loan schools). The schools themselves decide which program they will participate in and administer.
In terms of the loans themselves, no matter which program they originate from, the student is able to borrow only a limited amount per year based on their year in college. There are two specific types of Stafford loans to be considered. One is called subsidized and the other is unsubsidized. If the student demonstrates financial need as a result of filing the FAFSA (Free Application for Federal Student Aid), the student would be eligible for a subsidized Stafford loan where the government would pay the interest on the loan while the student is enrolled in school for at least six credits. If the student fails to demonstrate sufficient financial need, they can still qualify for a Stafford loan from the federal government, but it would be considered unsubsidized, meaning that the student would be responsible for the interest on the loan, even while they were going to school.
In terms of amounts, currently a freshman may borrow $3500.00; a sophomore, $4500.00; a junior and senior may borrow $5500.00 for each of those years. If the parents of a dependent student apply for a PLUS (Parent Loan for Undergraduate Students) and is denied based on a poor credit standing, the student can qualify for an additional $4000.00 of unsubsidized loan money in both of their freshman and sophomore years and $5000.00 in both of their junior and senior years.
In order to qualify for either a subsidized or unsubsidized Stafford loan, regardless of whether the school is a Direct Lending school or a FFEL school, the student must complete the FAFSA (Free Application for Federal Student Aid). The student also must complete student loan entrance counseling. This process of completing the counseling varies from school to school, so it is important to check the policies and procedures of the institution the student is attending for clarification. Finally, at some point the student must complete and sign an MPN (Master Promissory Note) that will serve as the student’s formal agreement regarding the loan itself, and the rules and regulations regarding repayment.
So, while almost nothing in life is guaranteed, if you meet all of the requirements regarding student loans, you can be guaranteed a certain amount from the federal government to help with those escalating college costs.