What is a Guaranteed Student Loan?
A Student Loan granted by a lending company and guaranteed by the Federal Government is called a Guaranteed Student Loan. The Federal Govt takes the responsibility of ensuring that the loan is repaid as agreed upon. The Government also takes up the accountability to repay a portion of the loan with interest to the lending company for the purpose of managing the loan.
The scheme which was previously known as the Subsidized Stafford Loan is now called as the Guaranteed Student Loan. The name was changed precisely because the description remains the same irrespective of the states in which the loans are guaranteed.
Why does the government take the responsibility to guarantee the students loan?
Under a Subsidized Stafford Loan which is a need based loan the amounts are granted without any credit check. Hence, it becomes important to ensure the lending companies that the amount so issued under the credit scheme will be repaid in time along with interest component if any charged under the scheme. The government steps in here to offer the accountability service and help the students in repaying the loan by offering subsidy in the principle and interest repayment. This is done by repaying a portion of the loan and the interest component to the lender under the agreed upon credit arrangement.
How does Guaranteed Student Loan benefit the students?
Students benefit to a great extent under Guaranteed Student Loan scheme. If the financial condition of the student requires him to take a loan for funding the college fees, then opting for this scheme would be highly beneficial to him, as the Government pays the interest on the loan up to a period of six months after he graduates and when the loan payment falls due. As this scheme would involve sufficient expenditure for the government, other new less costly loans have also been introduced by the government to help the students. Unsubsidized Stafford Loan does not provide any guarantee and hardly these loans are paid out. |
