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What is the difference between independent and dependent student status?

The Free Application for Federal Student Aid (FAFSA) asks several questions that determine your status as either a dependent student or an independent student. The difference between the two centers on the degree of access the student has to financial resources from their parents. Whether you are considered dependent or independent for the purpose of the financial aid application in turn determines the method by which your aid is calculated and the maximum amount in Stafford Loans that you can borrow.

Most traditional college students are dependent – even if they are paying their own way through college or no longer have a relationship with their parents. For more information, please read this article in our Student Loan Resources.

What are borrower benefits?

Borrower benefits, or loan discounts, can save you money on your loan. Review the example below to see how borrower benefits can change the pricing on a loan. Common borrower benefits include:

Rate reductions
Waiver of fees
Principal reductions
Cash rebates
Waiver of final payments

There are some benefits that you get just for taking a particular loan, while others you must earn. Lenders can require you to follow certain rules in order to qualify, such as using a bank account to automatically pay (debit) you monthly payments and/or making all of your loan payments on time.

How much can I save with borrower benefits?

Borrower benefits can have a significant impact on a loan's total cost, monthly payments, APR, and more. The following illustrates how a sample $5,000 loan differs on monthly payment, total cost, number of payments, and APR once various types of borrower rewards are applied.

Sample $5,000 Loan - Examples of Possible Savings for Typical Borrower Rewards

	No rewards	On-time payments 3.75% Principal Reduction after 36 on-time payments	Auto-debit of payments 0.25% Interest Rate Reduction for automatic debit of payments
Monthly Payment	$61.19	$61.19	$61.19
Number of Payments	120	116	114
*Total Cost of Loan	$7,342.95	$7,044.85	$6,938.36
1st Payment Due	Sep 2010	Sep 2010	Sep 2010
APR	5.39%	4.92%	4.74%

*The Total Cost of the Loan will change based on a combination of the monthly benefits and APR for each type of reward.

Am I eligible for any borrower benefits?

To qualify for borrower benefits, you may have to meet criteria specified by the lender. Some examples of these requirements are:

A certain number of consecutive, on-time payments
Automatic direct debit of your monthly payment from a checking or savings account

Check with each lender to see how and if you qualify for borrower benefits offered.

What should I know about borrower benefits?

Borrower benefits can make a significant difference in the cost of your loan. Make sure you research the fine print on a lender's borrower benefits, and follow any requirements set by the lender to qualify. Industry reports suggest that only 10% to 20% of borrowers actually achieve borrower benefits. Lenders are often counting on borrowers not earning the benefits – prove them wrong! Here are some potential pitfalls:

Failure to continuously pay on time
Discontinuing the use of automatic payments from a checking or savings account for the monthly payment
Not understanding the definition of "on-time" payment
Cancellation of borrower benefits by the lender or the sale of the loan to another lender
Failure to continue to meet the requirements for the borrower benefits means you may owe the lender the amount saved from using the benefits.

For more information on borrower benefits, check with your lender.

Understanding Student Loans

Stafford Loans are federal student loans backed by the U.S. Government that have fixed, low interest rates and are used expressly for paying for college costs such as tuition, room and board, and other expenses. Stafford Loans require the student and his or her family to fill out the FAFSA (Free Application for Federal Student Aid) with the financial aid office at their school. Payments on Stafford Loans can be deferred while the student is enrolled.

Stafford Loans come in two forms:

Subsidized. No interest accrues on subsidized Stafford Loans while the student is enrolled, but the student must qualify by demonstrating financial need through the FAFSA.
Unsubsidized. Interest does accrue on unsubsidized Stafford Loans while the student is enrolled, but nearly every student is able to borrow through the Stafford program regardless of need.

Most schools participate in the Federal Family Education Loan Program (FFELP), which is the system through which the federal government guarantees the loans, but many private banks and other entities compete as the actual lenders. This competition means it is important to shop around.

Other schools participate in the Direct Lending program, which means a student enrolled at that school receives their federal student loans directly from the school instead of from a lender. The terms of a Direct Stafford Loan are the same as the terms of a FFELP Stafford Loan.

The amount of money you can borrow for a Stafford loan depends on your year in school and whether you are classified as an independent or dependent student if an undergraduate, or your degree program if a graduate student. 2008-2009 borrowing limits are listed below.

	Freshman	Sophomore	Junior/Senior/5th	Undergraduate Cumulative Limit	Graduate Students	Cumulative Limit (Undergraduate + Graduate)
Stafford - Dependent Students	5,500	6,500	7,500	31,000	20,500*	138,500
Stafford - Independent Students	9,500	10,500	12,500	57,500	20,500*	138,500

Note: These limits are based on a full academic year and your qualifications as a full or part-time student. Rates are effective as of July 1, 2008.
* Higher Stafford loan limits are available to students in some graduate medical programs.

How to Use the Student Loan Comparison Tools

Save time, energy and money by comparing multiple student loan options from a variety of leading lenders for Stafford Loans. Simply enter the amount you need to borrow and a little bit about yourself, when you need the student loans, and where you go to school to see a customized list of student loan options.

What to Look for in a Student Loan

Use the comparison tools on this site to consider all of the costs of a student loan, including fees and rates. Students should always borrow the most they can in federal loans first (such as Perkins and Stafford) and then compare private student loans for the best rates, fees and costs.

Examine all of the attributes of each loan, such as: