Federal Stafford Loans
Stafford is the most common type of loan for students with and without financial need at all types of colleges.
There are two kinds of Stafford loans:
To receive your federal Stafford loan, you must be enrolled at least half time.
Subsidized Stafford Loans
- Based solely on financial need.
- Federal government pays the interest while you’re in college and during the six-month grace period after you graduate, leave school or enroll less than half time—you’ll make no loan payments until your grace period ends.
- Must meet all the requirements for federal aid.
Unsubsidized Stafford Loans
- For all eligible students, regardless of income or assets.
- Must meet the same requirements as those for the subsidized Stafford loan, except for demonstrating financial need.
- You’re responsible for paying all the interest on the loan, but you can defer interest payments while in school at least half time. If you do, the interest will be capitalized – added to the initial amount you borrowed – when repayment begins. Future interest costs will be based on the higher loan amount.
If you’re an independent student, you may be eligible to receive additional unsubsidized Stafford loans to help cover unmet financial need or replace some of your expected family contribution (EFC).
A Closer Look at Stafford Loans
How do you apply?
You must submit the FAFSA. Your school will tell you what type of loan you qualify for—subsidized or unsubsidized, or both. If you’re interested in taking out a Stafford loan, you’ll need to complete a loan application, sign a master promissory note (MPN) the first time you borrow and complete loan counseling, either in person or on the Web. Contact your college’s financial aid office for more information.
What are the loan limits and the interest rate?
Fixed at 6.8 percent. Starting July 1, 2008, for new subsidized loans taken out for undergraduate study, the rate will gradually drop for new loans each year until 2012 when the rate returns to 6.8 percent. Origination or federal default fees of up to 2 percent may be deducted from each loan disbursement.
Federal Student Loan Interest Rates and Loan Limits as of July 1, 2009.
Federal Stafford Loan Limits for Health Profession Programs
When do you begin repaying your loan?
Six months after you graduate, leave school or enroll less than half time. Typically, you’ll have up to 10 years to repay your loan, but you can choose a longer repayment term, depending on the amount you borrowed. If you’ll be going on to graduate school, you may request to postpone (defer) to repayment until you finish grad school.
How do you get your loan funds?
They will be sent directly to your college to pay for your tuition, fees, and room and board. You can ask your college to hold any remaining funds for future expenses or receive the money to pay for living costs.
How Much Can You Borrow?
Depends on your college’s cost of attendance (COA), your EFC, your year in school, whether you attend full time or half time, whether you’re a dependent or an independent student, and how much other financial aid you receive. Your loan and any other financial aid you receive, including private aid, cannot be more than your college expenses. Calculate how much you can afford to borrow and repay.
What’s accrued interest?
Let’s say you borrow $10,000 in an unsubsidized Stafford loan and the interest costs on the loan are about $57 a month (that’s at a fixed interest rate of 6.8 percent). You choose to defer paying the interest while you’re in school for four years instead if paying it as you go. The interest that accumulates is known as accrued interest. After four years, about $2,720 in interest will have accrued. When you begin repayment, you’ll owe $12,720 — the original $10,000 plus the $2,720 in accrued interest. The interest you’ll be charged during repayment will be based on this new higher amount. The process of adding interest to the amount borrowed is called capitalization.
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