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"Loans: The Stafford Loan Program"
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The government awards three types of financial aid for higher education: grants, loans, and work-study.
In the loan category there are four major programs backed by Uncle Sam: The Stafford Loan Program,
PLUS Loan Program, Consolidation Loan Program, and the Perkins Loan Program.
The following are details about the Stafford Loan Program:
Details: There are two types of Stafford Loans: Direct Stafford Loans and FFEL Stafford Loans.
Direct Stafford Loans are available through the William D. Ford Federal Direct Loan Program,
with the U.S. government as the lender. FFEL Stafford Loans are available through the
Federal Family Education Loan Program with participating banks, credit unions,
or other lenders as the lenders. For FFEL Stafford Loans, you will locate a lender by contacting your
school or the Federal Student Aid Information Center (1-800-4-FED-AID).
Eligibility: You must be enrolled at least half time.
Based on: Subsidized loans are based on financial need. The government subsidizes the interest
payments so that you are not charged interest before you begin repayment or in approved periods of deferment.
Unsubsidized loans are not based on financial need. You are charged interest from the time the loan is
disbursed until it is paid off. In one school year, you can have a Subsidized Stafford Loan,
Unsubsidized Stafford Loan, or both.
How much can I borrow with a Stafford loan?
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If you are an *eligible dependent student, you can borrow up to:
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| $2,625 |
freshman year |
| $3,500 |
sophomore year (after one year of completed study) |
| $5,500 |
junior, senior, fifth year |
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If you are an *eligible independent student, you can borrow up to:
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| $6,625 |
freshman year (if you combine subsidized and unsubsidized loans, no more than
$2,625 may be in subsidized loans) |
| $7,500 |
sophomore year (if you combine subsidized and unsubsidized loans,
no more than $3,500 may be in subsidized loans) |
| $10,500 |
junior, senior, fifth year (if you combine subsidized and unsubsidized loans,
no more than $5,500 may be in subsidized loans) |
| $18,500 |
graduate/professional students (if you combine subsidized and unsubsidized loans,
no more than $8,500 may be in subsidized loans) |
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The total outstanding debt allowable under the Stafford loan program:
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| $23,000 |
dependent undergraduate student |
| $46,000 |
independent undergraduate student (only $23,000 may be in subsidized loans) |
| $138,500 |
graduate/professional student (only $65,500 may be in subsidized loans) |
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*eligible: independent undergraduate students or dependent students whose parents are not able to get a PLUS loan
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What is the interest rate on a Stafford loan?
Stafford loan interest rates are variable and are adjusted every July 1st (based on the 91-day Treasury Bill + 1.7% while you're in school, grace or deferment and + 2.3% during repayment). Stafford interest rates are capped and will not exceed 8.25%
Are there any charges for a Stafford loan?
There is a combined fee of up to 4% of the loan, comprised of a 3% origination fee that goes to the
federal government and a 1% guarantee fee that goes toward the guaranty agency that insures your loans.
These fees are deducted proportionately from each loan disbursement so that you aren't required to come
up with any up-front money to obtain the loan.
To apply: Complete the Free Application for Federal Student Aid (FAFSA).
How you get the money: The money will be disbursed to your school either by the
Department of Education for Direct Stafford Loans or by the lender for FFEL Stafford Loans.
The money must first be used for tuition, fees, and room and board. After these expenses are paid,
you will receive the remaining amount in a check.
How you repay the money: You will begin to repay your loan after you graduate,
leave school, or drop below half-time enrollment. For Direct Stafford Loans, you can pay using one of
four methods: the Standard Repayment Plan of a fixed amount per month for up to 10 years;
the Extended Repayment Plan, which extends the repayment period to generally between 12 and 30 years;
the Graduated Repayment Plan, in which your payments start lower and increase generally every two years;
or the Income Contingent Plan, in which your income affects the amount of your monthly payments.
For FFEL Stafford Loans, you can pay using one of three methods: Standard Repayment Plan,
Graduated Repayment Plan, or the Income-Sensitive Repayment Plan, in which your income affects the
amount of your monthly payments. All loans must be repaid within 10 years.
Under certain circumstances, you can receive a deferment to temporarily postpone payments on
your loan. For subsidized loans, you do not pay interest during the deferment period.
For unsubsidized loans, you do. Under certain circumstances you can receive forbearance,
a limited and temporary postponement or reduction of your payments if you are unable to meet your
repayment schedule and are not eligible for a deferment. These circumstances may include poor health,
serving in a medical or dental internship or residency, or if the payments exceed 20 percent of your
monthly gross income. For both subsidized and unsubsidized loans, you pay interest during the forbearance
period. Deferments and forbearance must be approved by the Direct Loan Servicing Center (1-800-557-7392)
if you have a Direct Stafford Loan or with the lender if you have an FFEL Stafford Loan.
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Thank you for visiting,
Al Brouillard
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