Stafford Loan

A Stafford Loan is a federal student loan that is offered by the Department of Education to undergraduate and graduate students. The objective of Stafford Loans is to provide students with financial aid to help pay for the cost of their education, including tuition, fees, books, study materials, and living expenses. They complement personal and family resources and other financial aid, such as scholarships, grants, and work-study programs.

Types of Stafford Loans

stafford loanThere are two types of Stafford Loans available for undergraduate and graduate students: subsidized Stafford Loans and unsubsidized Stafford Loans. Subsidized Stafford loans are awarded on the basis of financial need, and the government covers the interest that accrues on the loan while the student is in school. Unsubsidized Stafford loans are not need-based, meaning any student can receive one, regardless of financial need. As they are unsubsidized, though, the student is responsible for any interest that accrues while in school. Students can choose to pay the interest while they are in school, but if they don’t, then the total interest accrued is added to the principal amount of their unsubsidized Stafford loan. This will increase the total amount that needs to be repaid because the interest will be calculated on the new, higher amount.

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Interest Rates

For the 2014-2015 academic year, the interest rate for subsidized and unsubsidized Stafford loans is fixed at 4.66%, while graduate unsubsidized Stafford loans have a fixed interest rate of 6.21%.

Borrowing Limits

The amount a student can borrow in Stafford Loans depends on several factors, including the student’s dependency status, year in school, and undergraduate or graduate status. Students should review their financial aid package or ask their school’s financial aid officer to find out how much they are eligible for.

Eligibility Requirements

To be eligible for a Stafford loan and other types of federal aid, a student must:

Students must also file a FAFSA (Free Application for Federal Student Aid) so that their school can determine financial need and subsequently the financial aid package a student will receive.

Big changes for federal Stafford Loans

July 1st, 2012 marked a big change in student lending. While the federal government extended the low rate for Subsidized Stafford loans for that academic year, there are other changes:

  • Elimination of Grace Period Interest Subsidy
    For Subsidized Stafford Loans for which the first disbursement is made on or after July 1, 2012, and before July 1, 2014, students will be responsible for the interest that accrues on the loan during the grace period. If a student does not pay the interest accrued, the interest will be capitalized to the principal amount of their loan when the grace period ends.
  • Eligibility of Students Without a High School Diploma
    After July 1, 2012, students must have either a high school diploma or a recognized equivalent (such as a General Educational Development certificate [GED]) or have been home schooled to be eligible for federal student aid. Students will no longer have the option of becoming eligible for federal student aid by passing an approved test or completing at least six credit hours or 225 clock hours of postsecondary education.
  • Elimination of Subsidized Stafford Loans for graduate students
    Starting July 1, 2012, graduate students will no longer be eligible for the Subsidized Stafford Loan funds. This will raise the Unsubsidized Stafford Loan limit from $12,000 annually to $20,500.
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Stafford Loan Topics

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