All About Stafford Loans



 


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What is a Stafford Loan?
Stafford Loans are federal loans for students, and have two variations:

 

  • Federal Family Education Loan Program (FFELP) - This type of Stafford Loan is provided by private lenders such as banks, savings & loans, and credit unions, and are guaranteed against default by the U.S. Government.
  • Federal Direct Student Loan Program (FDSLP) - This type of Stafford Loan is loaned directly by the U.S. government to students, and are administered by "Direct Lending Schools".

Stafford Loans are either subsidized or unsubsidized. You can receive a subsidized loan and an unsubsidized loan for the same enrollment period.

A subsidized Stafford Loan is awarded on the basis of financial need. You won't be charged any interest while you're in school or during authorized periods of deferment, as the federal government "subsidizes" the interest during these periods.

An unsubsidized Stafford Loan is not awarded on the basis of need. You'll be charged interest from the time the loan is disbursed until it's paid in full. You can either pay the interest as it becomes due, or you may opt to delay any payments and allow the interest to accrue (accumulate) while you're in school or during other periods of nonpayment. If you accrue (or "capitalize") the interest, it will be added to the principal amount of your loan, and additional interest will be based on that higher amount.

How Do I Apply For A Stafford Loan?
You apply for a Stafford Loan by using the FAFSA (Free Application for Federal Student Aid) or Renewal FAFSA, just the way you would for other types of federal student financial aid.

How much can I borrow?
Stafford Loan limits for dependent undergraduate students are as follows:

  • $2,625 if you're a first-year student enrolled in a program of study that is at least a full academic year.
  • $3,500 if you've completed your first year of study and the remainder of your program is at least a full academic year.
  • $5,500 if you've completed two years of study and the remainder of your program is at least a full academic year.

Stafford Loan limits for independent undergraduate students or dependent students whose parents are unable to get a PLUS Loan are as follows:

  • $6,625 if you're a first-year student enrolled in a program of study that is at least a full academic year (only $2,625 of this amount may be in subsidized loans).
  • $7,500 if you've completed your first year of study and the remainder of your program is at least a full academic year (only $3,500 of this amount may be in subsidized loans).
  • $10,500 if you've completed two years of study and the remainder of your program is at least a full academic year (only $5,500 of this amount may be in subsidized loans).

For periods of study that are less than an academic year, the amounts you can borrow will be less than those listed. Check with your school's financial aid office to find out how much you can borrow.

Graduate students can borrow up to $18,500 each academic year, although only $8,500 of that amount may be in subsidized Stafford Loans.

In general, the total debt you can have outstanding from all Stafford Loans combined is $23,000 as a dependent undergraduate student, $46,000 as an independent undergraduate student (only $23,000 of this amount may be in subsidized Stafford Loans), and $138,500 as a graduate or professional student (only $65,500 of this amount may be in subsidized Stafford Loans). The graduate debt limit includes any Stafford Loans received for undergraduate study.

What's the interest rate on a Stafford Loan?
The interest rate is variable (might change each year) but does not exceed 8.25 percent. Interest rates are adjusted each year on July 1, and you'll be notified of interest rate changes throughout the life of your loan. The current interest rate is 4.06%.

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