What are Federal Stafford Loans?
Direct and FFEL Stafford Loans are either subsidized or unsubsidized
student loans. You can receive a subsidized loan and an unsubsidized loan
for the same enrollment period.
A subsidized loan is awarded on the basis of financial need. You
won’t be charged any interest before you begin repayment or during authorized periods
of deferment. The federal government "subsidizes" the interest
during these periods.
An unsubsidized loan is not awarded on the basis of need. You’ll
be charged interest from the time the loan is disbursed until it’s paid in full.
If you allow the interest to accrue (accumulate) while you’re in school or during
other periods of nonpayment, it will be capitalized—that is, the interest will be
added to the principal amount of your loan, and additional interest will be based
on that higher amount.
NOTE: If your interest is capitalized, it will increase the amount
you have to repay. You can choose to pay the interest as it accumulates; if so,
you’ll repay less in the long run.
Who can get a Federal Stafford Loan?
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 when you
apply. The formula produces an EFC number displayed in your SAR. This number will
determine if you’re eligible for federal loans and grants and, if so, for how much.
How do I get this loan?
You apply using the FAFSA or Renewal FAFSA, just the way you would for other federal
student aid. Then, you sign a
promissory note that you’ll get from your lender, for FFEL Stafford Loans,
or from your school, for Direct Loans. The
promissory note is a binding legal document; when you sign it, you’re agreeing
to repay your loan under certain terms. Read the note carefully and save it.
How much can I borrow?
If you’re a dependent undergraduate student (see
Dependent Student) whose loan will first be disbursed on or after July 1,
2008, you can borrow up to:
- $5,500 if you’re a first-year student enrolled in a program of study that is at
least a full academic year.
- $6,500 if you’re a second-year student and the remainder of your program is at least
a full academic year.
- $7,500 if you’ve completed two years of study and the remainder of your program
is at least a full academic year.
If you’re a dependent student whose parents were unable to secure a PLUS Loan or
an independent undergraduate student whose loan will first be disbursed on or after
July 1, 2008, you can borrow up to:
- $9,500 if you’re a first-year student enrolled in a program of study that is at
least a full academic year
(only $3,500 of this amount may be in subsidized loans).
- $10,500 if you’ve completed your first year of study and the remainder of your program
is at least a full academic year (only $4,500 of this amount may be in subsidized
loans).
- $12,500 if you’ve completed two years of study and the remainder of your program
is at least a full academic year (only $5,500 of this amount may be in subsidized
loans). For periods of study that are less than an academic year, the amounts you
can borrow will be less than those listed. Check with your school’s financial aid
office to find out how much you can borrow.
If you’re a graduate or professional school student, you can borrow up to $20,500
per academic year. (Only $8,500 of this amount may be in subsidized Stafford Loans.)
The total amount a graduate or professional school student can borrow over the course
of their studies may vary based on selected program.
For periods of study less than an academic year, the maximum amount borrowed may
be lower that that listed. Check with your school’s financial aid office to find
out how much you can borrow.
NOTE: Federal Stafford Loans are not made to students enrolled in programs that
are less than one-third of an academic year.
NOTE: The amounts given above are the maximum yearly amounts you can borrow in both
subsidized and unsubsidized loans. You might receive less than these amounts if
you receive other financial aid that is used to
cover a portion of your
Cost Of Attendance (COA).
Generally, the total debt you can have outstanding from all Stafford Loans combined
is
- $31,000 as a dependent undergraduate student.
- $57,500 as an independent undergraduate student (only $23,000 of this amount may
be in subsidized loans).
- $138,500 as a graduate or professional student (only $65,500 of this amount may
be in subsidized loans). The graduate debt limit includes any Stafford Loans received
for undergraduate study. The aggregate loan limit for graduate and professional
school students enrolled in certain health programs may be greater.
NOTE: Your school can refuse to certify your loan application or can certify a loan
for an amount less than you would otherwise be eligible for if the school documents
the reason for its action and explains the reason to you in writing. The school’s
decision is final and cannot be appealed to the U.S. Department of Education.
How will I receive my Federal Stafford Loan?
The loan funds will be sent to your school. In most cases, your loan will be disbursed
in at least two installments, and no installment will be greater than half the amount
of your loan.
Your loan money must first be used to pay for your tuition, fees, and room and board.
If loan funds remain, you’ll receive them by check or in cash, unless you give the
school written permission to hold the funds until later in the enrollment period.
If you’re both a first-year undergraduate student and a first-time borrower, your
first disbursement can’t be made until 30 days after the first day of your enrollment
period. That way, you won’t have to repay the loan if you withdraw during the first
30 days of classes. (However, you might owe money to the school for a portion of
tuition or other fees.)
Can I cancel the loan if I change my mind, even if I’ve signed the
promissory note agreeing to the loan’s terms?
Yes. Your school must notify you in writing whenever it credits your account with
your Stafford Loan funds. This notification must be sent to you no earlier than
30 days before, and no later than 30 days after, the school credits your account.
You may cancel all or a portion of your loan if you inform your school within 14
days after the date your school sends you this notice, or by the first day of the
payment period, whichever is later. (Your school can tell you the first day of your
payment period.) If you receive Stafford Loan funds directly by check, you may refuse
the funds by returning the check.
What’s the interest rate on these loans?
The interest rate on all unsubsidized Stafford Loans disbursed after July 1, 2006
is fixed at 6.8%.
The interest rates on subsidized Stafford Loans disbursed between July 1, 2006 and
June 30, 2008 is 6.8% for both undergraduates and graduate and professional school
students. Loans first disbursed on or after July 1, 2008 are fixed at 6.0% for undergraduates
and at 6.8% for graduate and professional school students.
The interest rate on loans disbursed between July 1, 1998 and June 30, 2006 is variable
(might change each year) but will not exceed 8.25 percent. Interest rates are adjusted
each year on July 1. You’ll be notified of interest rate changes throughout the
life of your loan. For interest rates on a FFEL Stafford Loan, check with your lender.
For interest rates on a Direct Stafford Loan, check with the
Direct Loan Servicing Center.
If you have subsidized loans, you won’t be charged interest 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 (accumulate) when you enter repayment.
If you have unsubsidized loans, you’ll be charged interest from the day the loan
is disbursed until it’s paid in full, including in-school, grace, and deferment
periods. You can pay the interest during these periods, or it can be capitalized.
Other than interest, is there any charge to get the loans?
You’ll pay a fee of up to 4% of the loan, to be deducted proportionately from each
loan disbursement. For a FFEL Stafford Loan, a portion of this fee goes to the federal
government, and a portion goes to the
guaranty agency to help reduce the cost of the loans. For a Direct Stafford
Loan, the entire fee goes to the government to help reduce the cost of the loans.
If you don’t make your loan payments when scheduled, you may be charged collection
costs and late fees.
When do I pay back these loans?(1)
After you graduate, leave school, or drop below
half time enrollment, you have six months before you begin repayment. This
period of time is called a grace period.
During the grace period on a subsidized loan, you don’t have to pay any principal,
and you won’t be charged interest. During the grace period on an unsubsidized loan,
you don’t have to pay any principal, but you will be charged interest. You can either
pay the interest or it will be capitalized.
After you leave school or drop below half time enrollment, your lender will send
you information about repayment and you’ll be notified of the date repayment begins.
However, you’re responsible for beginning repayment on time, even if you don’t receive
this information. Failing to make payments on your loan is likely to have a negative
effect on your credit rating.
1. The U.S. Department of Education (ED) has issued special guidance for those called
to active duty as a result of the September 11 terrorist attacks. If a borrower’s
loans are in an in-school status, in-school deferment status, or in a grace period
when the borrower is ordered to active duty or reassigned, the loan holder must
maintain the loans in that status during the period of the borrower’s active duty
service or reassignment, plus the time necessary for the borrower to resume enrollment
in the next regular enrollment period reasonably available to the borrower. The
maintenance of loan status may not exceed a total of three years, including the
period of time necessary for the borrower to resume enrollment.
For a borrower whose loans are in repayment, the loan holder must grant a forbearance
(temporary suspension of repayment) for the expected period of the borrower’s active
duty status, beginning on the first day of active duty, not to exceed one year.
Forbearance beyond the initial period will require supporting documentation and
a written agreement by the borrower.
For more information about loan repayment options that might be available to a borrower
in this situation, the loan holder should be contacted directly.
Are there any tax credits available for paying back these loans?
Yes, there are tax incentives for certain higher education expenses, including a
deduction for student loan interest for certain borrowers. This benefit applies
to federal and nonfederal loans taken out to pay for postsecondary education costs.
The maximum deduction is $2,500 a year. IRS Publication 970, Tax Benefits for Higher
Education, explains these credits and other tax benefits. You can find out more
by calling the IRS at 1-800-829-1040. TTY callers can call 1-800-829-4059.
Is it ever possible to postpone repayment of my loan?
Yes, under certain conditions, you can receive a "deferment" or "forbearance" on
your loan, as long as the loan isn’t in
default. A deferment allows you to temporarily postpone payments on your
loan. If you have a subsidized loan, you won’t be charged interest during the deferment.
If your loan is unsubsidized, you’ll be responsible for the interest during the
deferment. In that case, if you don’t pay the interest as it accrues (accumulates),
it will be capitalized and the amount you’ll have to pay will increase.
Click here for the list of deferments available for loans disbursed on or
after July 1, 1993.
For information on deferments available to borrowers with outstanding loans received
before that date, FFEL Stafford borrowers should contact the lenders or agencies
holding the loans. Direct Stafford Loan borrowers can contact the Direct Loan Servicing
Center at:
The Direct Loan Servicing Center
Borrower Services: 1-800-848-0979 or 1-315-738-6634
Fax: 1-800-848-0984
TTY: 1-800-848-0983
www.dl.ed.gov
If you’re temporarily unable to meet your repayment schedule, but you’re not eligible
for a deferment, your lender might grant you forbearance for a limited and specified
period. During forbearance, your payments are postponed or reduced, or your repayment
period might be extended. Whether your loans are subsidized or unsubsidized, you’ll
be charged interest during a period of forbearance. If you don’t pay the interest
as it accrues, it will be capitalized.
You might be granted forbearance if you are
- unable to pay due to poor health or other unforeseen personal problems.
- serving in a medical or dental internship or residency.
- serving in a position under the National Community Service Trust Act of 1993 (forbearance
may be granted for this reason for a Direct or FFEL Stafford Loan, but not for a
PLUS Loan).
- obligated to make payments (on certain federal student
loans) that are equal to or greater than 20 percent of your monthly gross income
This is not a complete list of conditions that might qualify you for forbearance
but offers some examples.
Deferment and forbearance are not automatic. If you have a Direct Stafford Loan,
you must contact your Direct Loan Servicing Center to request either option. If
you have a FFEL Stafford Loan, you must contact the lender or agency that holds
your loan. You might have to provide documentation to support your request. You
must continue making scheduled payments until you’re notified that the deferment
or forbearance has been granted. Not making payments on your loan is likely to have
a negative effect on your credit rating, and your loan could go into default.
Is it ever possible to have my Stafford Loan discharged (canceled)?
Yes, but only under specific circumstances and as long as you’re not in default*
on the loan. A discharge releases you from all obligation to repay the loan.
Your loan can’t be canceled because you didn’t complete the program of study at
the school (unless you couldn’t complete the program for a valid reason—because
the school closed, for example), you didn’t like the school or the program of study,
or you didn’t obtain employment after completing the program of study.
For more information about discharge, Direct Stafford Loan borrowers should contact
the Direct Loan Servicing Center. FFEL Stafford Loan borrowers should contact the
lenders or agencies holding their loans.
Repayment assistance (not a discharge but another way to satisfy your obligation
to repay) might be available if you serve in the military. For more information,
contact your recruiting officer.
Another type of repayment assistance (again, not a discharge) is available through
the U.S. Department of Health and Human Services’ Nursing Education Loan Repayment
Program (NELRP). This program will help repay student loans
for registered nurses in exchange for their service in eligible facilities located
in areas experiencing a shortage of nurses. All NELRP participants must enter into
a contract agreeing to provide full-time employment in an approved eligible health
facility (EHF) for 2 or 3 years. In return, the NELRP will pay 60 percent of the
participant’s total qualifying loan balance for two years or 85 percent of the participant’s
total qualifying loan balance for three years. For more information, call NELRP,
toll-free, at 1-866-813-3753 or visit
www.bhpr.hrsa.gov/nursing/loanrepay.htm.