Stafford Loans
What is a Stafford loan?
The Stafford loan is the major form of self-help financial aid. This loan has a low interest rate, requires no collateral, and does not have to be paid back until six months after you graduate or drop below a half-time enrollment status.
Two federal programs offer Stafford loans: The Federal Family Education Loan (FFEL) Program and the William D. Ford Federal Direct Loan (Direct Loan) Program. The terms and conditions of loans borrowed through the two programs are similar. The major differences between them are the source of the loan funds, some aspects of the application process, and the available repayment plans. Under the FFEL Program, the funds for your loan are lent to you from a bank, credit union, or savings and loan association. The federal government guarantees these loans against default. Under the Direct Loan Program, your school receives the funds for your loan directly from the U.S. government.
Note: The school you are (or will be) attending has chosen which federal program they want to participate in. You may contact the school's financial aid office to find out if they participate in the FFEL Program or the Direct Loan Program.
Click on the program's name for more information.
Both federal programs offer two types of Stafford loans: subsidized and unsubsidized.
A subsidized Stafford loan is awarded on the basis of financial need. If you receive a subsidized Stafford loan, you will not be charged any interest before you begin repayment, or during authorized periods of deferment. The federal government pays your interest during these periods.
An unsubsidized Stafford loan charges you interest from the time the loan is disbursed until it is paid in full. If you allow the interest to accumulate, it will be capitalized - that is, the interest will be added to the principal amount of your loan and additional interest will be based upon the higher amount. This will increase the amount you have to repay. If you choose to pay the interest as it accumulates, you'll repay less in the long run.
You can receive a subsidized Stafford loan and an unsubsidized Stafford loan for the same enrollment period.
How do I qualify?
To determine if you're eligible, the U.S. Department of Education uses a standard formula, established by Congress, to evaluate the information you report on the Free Application for Federal Student Aid (FAFSA). The formula will produce an Expected Family Contribution figure that your institution will use to determine your eligibility for loans and grants. Your institution will inform you via an award letter if you qualify for a Stafford loan.
How much can I borrow?
That depends on whether you're considered a dependent or independent student. You are considered an independent student if you meet any of the following criteria:
- You are over age 24 by December 31 of the award year
- You are married
- You have legal dependents
- You are a veteran of the U.S. Armed Forces
- You are a graduate or professional student
- You are an orphan or ward of the court
If any one of the above criteria applies to you, you are considered an independent student.
The chart below outlines the annual loan limits for the Stafford loan based on your dependency status and your year of studies.
| |
|
SUBSIDIZED ANNUAL LOAN LIMITS |
UNSUBSIDIZED ANNUAL LOAN LIMITS |
| DEPENDENT STUDENTS |
First Year of Studies |
$3,500 |
$3,500 minus subsidized Stafford awarded |
| Second Year of Studies |
$4,500 |
$4,500 minus subsidized Stafford awarded |
| Third to Fifth Year of Studies |
$5,500 |
$5,500 minus subsidized Stafford awarded |
INDEPENDENT STUDENTS
(and dependent students whose parents are unable to borrow under the PLUS Program) |
First Year of Studies |
$7,500 |
$7,500 minus subsidized Stafford awarded |
| Second Year of Studies |
$8,500 |
$8,500 minus subsidized Stafford awarded |
| Third to Fifth Year of Studies |
$10,500 |
$10,500 minus subsidized Stafford awarded |
| Graduate Studies |
$8,500 |
$20,500 minus subsidized Stafford awarded |
Please note that the amounts given above are the maximum yearly amounts that you can borrow in Stafford loans. You may receive less than the maximum amount if you receive other financial aid that is used to cover a portion of your cost of attendance, or if your period of study is less than an academic year in length. Talk to your financial aid administrator to find out how much you can borrow.
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 may be in subsidized Stafford loans)
- $138,500 as a graduate or professional student (only $65,500 of this amount may be in subsidized Stafford loans). Certain eligible health profession students, if determined by their financial aid office, may be eligible for an increased unsubsidized aggregate limit.
What interest rate is charged on Stafford loans?
New Stafford loans have a fixed interest rate of 6.8%. Stafford loans that were taken out before July 1, 2006, have a variable interest rate that changes each year on July 1.
If you have subsidized Stafford loans, you will not be charged interest on these loans while you're enrolled in school at least half time, during a grace period, or during authorized periods of deferment. Interest will begin to accrue when you enter repayment.
If you have unsubsidized Stafford loans, you will be charged interest from the day the loan is disbursed until it is repaid in full, including all in-school, grace, and deferment periods. You may choose to pay the interest during these periods, or it can be capitalized.
Will I have to pay a fee to receive a Stafford loan?
You will pay fees of up to 3% of the loan amount. The amount of your fees may vary as many lenders and guarantors offer rebates and discounts on loan fees. These fees are deducted proportionately from each disbursement of your loan. For a FFEL Stafford Loan, a portion of this fee goes to the federal government to help reduce the cost of running the loan program. For a Direct Loan Stafford Loan, the entire fee goes to the government to help reduce the cost of running the loan program. Also, if you do not make your loan payments when they are due, you may be charged collection costs and late fees.
When do I have to pay back these loans?
After you graduate, leave school, or drop below half-time enrollment, you have six months before you begin repayment. This is called a grace period.
During the grace period on a subsidized Stafford loan, you are not required to make any payments and no interest will be charged. During the grace period of an unsubsidized Stafford loan, you do not have to pay any principal, but interest will be charged. You can either pay the interest or allow it to be capitalized - or added to your principal balance - upon entering repayment.
After you leave school or drop below half-time enrollment, you will receive information about repayment and be notified of the date your repayment begins. However, you are responsible for beginning repayment on time even if you do not receive this information. The maximum term to repay your loans is 10 years.
Is it ever possible to postpone repayment of my loan?
Yes. Under certain circumstances, you can receive a deferment or forbearance on your loan, both of which allow you to temporarily postpone payments.
Deferment
If you have a subsidized Stafford loan, you will not be charged interest during deferment. If you have an unsubsidized Stafford loan, you will be responsible for the interest on the loan during the deferment. If you do not pay the interest as it accrues, it will be capitalized, or added to your principal balance.
See the
Deferment Summary for the list of deferments.
Forbearance
If you are temporarily unable to meet your repayment schedule, but are not eligible for a deferment, you may receive forbearance for a limited and specified period of time. During forbearance, your payments are postponed or reduced, and interest continues to accrue, regardless of the loan types. If you don't pay the interest that accrues during your forbearance period, it will be capitalized when repayment begins again.
Deferments and forbearances are not automatic; you must request them. If you borrowed through the FFEL Program, you must contact the lender or agency that holds your loan. If you have borrowed through the Direct Loan Program, you must contact the Direct Loan Servicing Center. For either program, you may have to provide documentation to support your request. You must continue making scheduled payments until you receive notification that the deferment or forbearance has been granted.
Can Stafford loans be discharged?
Yes, under certain circumstances. A discharge releases you from all obligations to repay the loan. If the borrower of a FFEL Loan becomes deceased, the loan will be forgiven. If the borrower becomes totally and permanently disabled, the loan may be forgiven.
Your loan cannot be discharged because you did not complete the program of study at the school (unless you were unable to complete the program because the school closed), did not like the school or program of study, or did not obtain employment after completing the program of study.
Repayment assistance may be available if you serve in the military. Repayment assistance is not a discharge of your Stafford loan obligation; rather it's another way to satisfy your obligation to repay. For more information, contact your recruiting officer.
For more information about loan discharge or repayment assistance, FFEL Stafford loan borrowers should contact the lender or agency that holds their loans. Direct Loan Program Stafford loan borrowers should contact the Direct Loan Servicing Center.