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Guaranteed Student Loans
A guaranteed student loan is one guaranteed by the federal government but provided by a lending institution. It is the responsibility of the federal government to make sure the borrower pays the loan back as per agreed, which includes paying the loan interest and paying the lenders to handle the loan. The Federal government accepts responsibility for the guaranteed student loans if the borrower defaults, which gets rid of nearly all the chances of loss to the lender. They originally called the present day Subsidized Federal Stafford loan a Guaranteed Student Loan in the past. Because this term may also apply to any federal or state loan that the lender guarantees against default, they changed the name. Guaranteed student loans are not something new and have been around for almost fifty years.
The subsidized Stafford loans are interest free and based on a borrowers financial need but in order to apply a student must submit a FAFSA application form to find out if they qualify or are eligible. Through completing the Free Application for Federal Student Aid, students must show that are financially needy and, based on their low Expected Family Contribution or EFC, prove they lack adequate university or college funding. Because the guaranteed student loans are need based, the educational institution or bank lending the student the money cannot perform the standard credit checks that they would do on a typical loan. Before a private lender or lending institution can agree to a guaranteed loan, there must be an entity taking the chance. The state or federal government that provides guaranteed student loans must accept loan responsibility, dispersing subsidy payments to the loaner who accepts no risk or responsibility in cause of loan default. For a student with extreme financial needs, a guaranteed student loan is one of the better loans to help students fund their college education.
Without a guaranteed student loan or special subsidized federal loan, many students that hoped to attend university or college, but are financially needy, would not have adequate funding to attend. Guaranteed student loans are different from subsidized loan in some ways although neither requires the student to pay interest on the loan. Students do not have to worry about fluctuating interest rates and save money with no interest loans unlike individuals responsible for their loan interest. Some of the ways students receive eligibility for guaranteed student loans include being in college or university as either half or full time students. In addition, if the student is repaying their loan and takes out an in-school deferment, return to school deferment or an unemployment deferment during those times, the government would still pay the students interest on their loans. To find further information on guaranteed student loans there are several interesting sites including the US governments websites on Direct Loans and Funding for Education Beyond High School.
When looking into a guaranteed student loan so you are able to attend an accredited university, college, technical or vocational school, there are loans available, where the state guarantees the repayment in case of default, complete disability or death, but does not provide the funds for the student loan.
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