Stafford Loans

The Federal Stafford Loan is the most popular low-interest education loan designed for undergraduate and graduate students. This loan is guaranteed by the federal government and offers flexible repayment options. Schools that participate in the Federal Family Education Loan (FFEL) Program or in the William D. Ford Federal Direct Loan (Direct Loan) Program, or both, offer Stafford Loans.

FFEL Program vs. Direct Loan Program

Schools generally participate in either the FFEL or Direct Loan Program, but some may participate in both. The eligibility rules and loan amounts are identical under both programs. Repayment plans, however, differ somewhat.

• FFEL funds will come from a bank, credit union, or other lender that participates in the program. You will need to choose a lender if you obtain this loan. Schools that participate in the FFEL Program will usually have a list of preferred lenders. Borrowers may choose a lender from that list, or choose a different lender they prefer.
• Direct Loan funds will come directly from the federal government. No lender choices will need to be made.

Subsidized vs. Unsubsidized Stafford Loans

There are two types of Federal Stafford Loans: subsidized and unsubsidized. Depending on household income, a student may be eligible for one or both varieties of student loans. The school will specify the loan type for which the student qualifies.

• Subsidized Stafford Loans are awarded on the basis of financial need. The government pays the interest while the student is in school, in deferment (if applicable), and during the grace period before repayment begins.
• Unsubsidized Stafford Loans are not based on income, but not all students will be eligible for the maximum loan amount. A student’s year in school, their additional financial aid awards and the estimated cost of attendance will be factored into the eligibility decision. Student who borrow unsubsidized Stafford Loans are responsible for all interest that accrues while they are in school, in deferment, and during the grace period. As long as the student doesn’t exceed yearly Stafford Loan borrowing limits, they may take out both subsidized and unsubsidized loans.

If you're a dependent undergraduate student, each year you can borrow up to:

• $5,500 (for the 2010-11 academic year) if you're a first-year student enrolled in a program of study that is at least a full academic year.
• $6,500 (for the 2010-11 academic year) if you've completed your first year of study and the remainder of your program is at least a full academic year.
• $7,500 if you've completed at least two years of study and the remainder of your program is at least a full academic year.

If you're an independent undergraduate student or a dependent student whose parents have applied for but were unable to get a PLUS Loan (a parent loan), each year you can borrow up to:

• $9,500 (for the 2010-11 academic year) if you're a first-year student enrolled in a program of study that is at least a full academic year. No more than $3,500 of this amount may be in subsidized loans.
• $10,500 (for the 2010-11 academic year) if you've completed your first year of study and the remainder of your program is at least a full academic year. No more than $4,500 of this amount may be in subsidized loans.
• $12,500 (for the 2010-11 academic year) if you've completed two years of study and the remainder of your program is at least a full academic year. No more than $5,500 of this amount may be in subsidized loans.

The student is responsible for all interest that accrues while they are in school, in deferment, and during the grace period. As long as the student doesn’t exceed yearly Stafford Loan borrowing limits, they may take out both subsidized and unsubsidized loans.

Borrowing Limits at a Glance (2010-2011 School Year)

Loan amounts vary depending on a student's year in school and on whether they are considered a financially dependent or independent student. The school's financial aid office will determine a student's eligibility for a subsidized or unsubsidized loan. The amount borrowed may not exceed the yearly cost of attendance minus grants and other financial aid received.

*The government determines dependent and independent student status. Annual limits may vary depending on your chosen medical discipline

Interest Rates and Fees

• Interest rates on unsubsidized Stafford Loans first disbursed on or after July 1, 2010, are fixed at 6.8% for both undergraduates and graduate school students.
• Interest rates on subsidized Stafford Loans first disbursed between July 1, 2010, and June 30, 2011, are fixed at 4.5%. Graduate Stafford Loans (both subsidized and unsubsidized) have a fixed interest rate of 6.8% through 2013.
• In addition to interest rates, for loans first disbursed between July 1, 2010 and June 30, 2011, up to 1.5% in fees that includes a 0.5% federal origination fee and a 1% federal default fee will be added to a student’s loan profile.

Eligibility Requirements

• Enrolled at least half time at an eligible school and maintaining satisfactory academic progress
• A U.S. citizen or a permanent resident of the U.S. or an eligible territory
• Not currently in default. Must not owe a refund on any Title IV loan or grant
• Registered with Selective Service (if borrower is a male under age 25)

Loan Repayment

• Students will have a 6 month grace period after graduating, leaving school, or dropping below half-time status. After this time, payments must be made.
• During the grace period, interest will not be charged on subsidized loans but will be charged on unsubsidized loans.
• Payments are usually due on a monthly basis.
• Under certain circumstances, e.g. health problems, a student may be eligible for loan deferment.

For more information on Federal Stafford Loans, please visit www.studentaid.ed.gov.