In this video, I explain Student stafford loans (subsidized and unsubsidized loans) as covered on the CPA exam Tax Compliance and Planning.
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Student loans are a common method used by students to finance their college education. Unlike scholarships or grants, loans must be repaid, making it important for students to carefully plan their finances to ensure they can repay these loans. Even if a student doesn't complete their program, they are still obligated to repay federal student loans, although there are certain conditions under which the loan might be forgiven, cancelled, or discharged.

One specific type of student loan is the Stafford Loan, available to both undergraduate and graduate students. The eligibility for a Stafford Loan is determined based on financial need, which is calculated by subtracting any other financial aid a student receives from the total cost of attendance. These loans are provided by the U.S. Department of Education and come with flexible repayment options. There are two categories of Stafford Loans: subsidized and unsubsidized.

Subsidized Stafford Loans are need-based. For these loans, the federal government pays the interest while the student is in school, during any periods of deferment, and during the grace period before repayment starts. This can significantly reduce the cost for students while they are studying or not earning an income.

Unsubsidized Stafford Loans, on the other hand, are not solely based on financial need. Eligibility depends on the student’s year in school, the cost of attendance, and the amount of other financial aid the student receives. Unlike subsidized loans, students with unsubsidized Stafford Loans are responsible for paying all the interest that accrues during their time in school, any deferment periods, and the grace period.

It's possible for a student to be eligible for both types of Stafford Loans. The specific amount and type of loan a student can receive will depend on their individual financial situation and educational costs.



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