To insure a loan and agree to pay the holder if the borrower default. Federal Stafford Loans are guaranteed by numerous state and national agencies on behalf of the federal government. Private loans are guaranteed by private guarantee agencies. A percentage of principal charged to the borrower by the guarantor to insure a lender against loss resulting from a borrower's failure to repay. The lender, institution, or agency that originated the loan and holds its legal title, or a lender or secondary market that purchased the loan from the original holder.
Payments increase as income rises.
The repayment term may be lengthened in this program. A financial instrument that provides the basis for the interest rate charged on a loan. Federal Stafford loans are typically indexed to the current rate of the 91-day U.S. Treasury bill. Interest is calculated as a percentage rate of the loan principal. The interest rate charged can be fixed, which means it does not change over the life of the loan, or the rate can be variable, in which case, it changes periodically.