Popular Federal Stafford Loans
The First Choice for Flexible and Affordable Student Aid
NOTE: The Stafford Loan, as it has been known for years, has been recently discontinued – replaced by the Federal Direct Loan programs. The following page has been maintained for historical references, but the most current information about these programs now will be found under the Direct Loan Program page.
One of the most familiar names in Federal student loans is Stafford. Stafford Loans deliver low-interest loans guaranteed by the government. They are awarded to both undergraduate and graduate students through the Direct Loan Program or the Federal Family Education Loan Program (FFELP).
If you are one of millions of low-income student borrowers, the government has a deal for you: subsidized Stafford Loans. The government will pay the interest on your loan while you go to school, during the six month grace period after graduation, and anytime you may have a loan deferment or forbearance situation. All you need to do is attend school at least half time in an undergraduate or graduate degree-granting program. Not a bad deal.
Unsubsidized Stafford Loans: Almost Everyone Qualifies
Many millions more just like you qualify for the unsubsidized Stafford loans. These are awarded regardless of financial need. In many cases students that qualify for subsidized loans may also be approved for loans that are unsubsidized as well. The government does not pay the interest on the loan. Interest accrues from the day the loan is paid out to your school. Traditionally your repayment also begins once the loan is fully disbursed, but many student borrowers opt to defer both interest and principal until after graduation.
Applying for Stafford Loans
The federal government determines if you are eligible for subsidized or unsubsidized Stafford Loans. But in order to be considered for this or any other federal loans you must fill out and file the Free Application for Federal Student Aid (FAFSA). Forms are available online and in Spanish versions. This form is a must for almost all types of financial aid, including many scholarships and grants from colleges and universities.
Fail to file a FAFSA and you shoot yourself in the foot as far as affordable financial aid goes.
Where to Apply
Once you’ve chosen a school you also find out whether you are eligible for student loans under the Direct Loan Program or the FFELP. Some schools participate in both. In the case of the DL program you’ll borrow from the Department of Education. For FFELPs you’ll have your pick of lender. This is important: schools may provide you with a “preferred lender” list. Preferred lender lists do not in any way obligate you. You may borrow Stafford Loans through any FFEL lender you choose, regardless of list.
Another option you don’t want to miss: borrowing from your home state. In partnership with loan guaranty agencies and student loan providers most states also extend the FFEL program. If you need private student loans to fill in financing gaps this source may also be a superior deal to any other private loan on the market.
Other FFEL lending sources for Stafford Loans you may not have considered include private lenders such as SunTrust, Bank of America, and Wachovia, among others. All have expanded their web presence to include helpful and interesting student loan pages that offer you dozens of tips and resources on college financial planning, student loan cost calculators, and FAFSA applications that get you Stafford and other Federal student loans.
Stafford Loan Limits
Exactly how much you may borrow on your Stafford loans is dependent on an assortment of factors including:
- How much you already have been awarded on other loans.
- Cost of your tuition.
- Undergraduate or graduate status.
- Your current year of school (freshman, sophomore…).
On average, dependent undergraduate students may borrow between $3,500 and $5,500 and independent students, between $7,500 and $10,500.
One of the beauties of the Stafford Loan program is its affordability and accessibility. Loan interest rates make this a very attractive financial tool: As of 2007 the interest rate for Stafford loans was fixed at 6.8%. But with the passage of the College Cost Reduction Act of 2007 the new Stafford interest rates will be halved, or cut to 3.4%. This reduction will take place incrementally over the course of five academic years. By 2012 this low rate will sit firmly in place.
Popular Repayment Options for Federal Stafford Funding
Students with subsidized Stafford loans don’t have to worry about repayment until six-months following graduation, the end of the subsidy and the beginning of loan repayment. Borrowers with unsubsidized Stafford Loans must begin repayment immediately, but may opt to defer payments until this same six-month grace period is complete.
When you signed your loan papers you chose a repayment schedule, one of four options:
- Standard repayment plans feature balanced monthly payments for usually 10 years.
- Graduated repayment plans are useful for borrowers unsure that their income will be stellar their first year or so, but fairly confident their earnings will grow. Payments start out small and gradually get larger over the life of the loan.
- Extended repayment features a longer or stretched out loan life so borrowers have smaller monthly payments. Payments may be standard or graduated.
- Income sensitive repayment features variable payments that remain flexible and proportionate to your level of income. If you are in a business or job where income could fluctuate, this is a good solution.
Repayment Options You May Not Know About
When you cannot afford to make monthly student loan payments you must consider another repayment option. Considering the average college debt the number of borrowers, just like you, turning to alternative solutions is growing.
- The federal loan program includes a Federal Consolidation Loan perfectly suited to borrowers that need to simplify monthly payments. Before you default on your student loan, take our self-assessment quiz. Find out if you are a candidate for loan consolidation.
- What if your financial problems are likely to be short-lived? Loan deferment plans often provide a suitable alternative for borrowers that face short-term income loss. If you lose your job or get laid off, you’d be income challenged for a certain foreseeable period of time. A practical financial solution? Find out from your lender how you can defer your loans.
The Stafford Loans are one of the most flexible and appealing student loan products on the market regardless of your situation.