The most common loan for undergraduate, graduate, vocational and professional students. Eligibility is primarily established via the Free Application for Federal Student Aid. Loan limits are based on a number of factors but cannot exceed the cost of attendance.
There are two types of Stafford loans:
Subsidized
Need-based
Federal government pays the interest while the student is enrolled at least half-time and during the grace period before repayment begins
Monthly payments begin six months after the student graduates, drops below half time or withdraws from school.
Unsubsidized
Not need-based.
Interest accrues from the time the loan is disbursed
Interest payments can be deferred though students should always do their best to pay the interest while in school so their debt will be the principal amount only when repayment begins.
An origination fee (1 percent) and a federal default fee (1 percent) may be deducted from the loan.
The origination fee will drop to .5 percent in 2009, and be eliminated in 2010.
Repayment plans
Standard: Fixed monthly payments of at least $50 or the accrued interest. Up to 10 years to repay.
Graduated: Payments starts low and increase over time. Up to 10 years to repay.
Extended: Payments can be fixed or graduated. Up to 25 years to repay. Only for borrowers who have more than $30,000 in outstanding Stafford loans, and who first borrowed after October 6, 1998.
Income-sensitive: Payments based on gross monthly income and the amount borrowed, but must cover at least the interest due. Repayment terms vary.
Disbursement
Loan funds are usually sent to the school in two or more payments and released to the student after enrollment status and academic progress have been verified. For first-year students, the first loan disbursement may not be released any sooner than 30 days after classes begin.
Total Stafford borrowing
For undergraduates: may not exceed $23,000 for dependent students and $46,000 for independent students (no more than $23,000 of which may be in subsidized Stafford loans).
For graduate students: the aggregate limit is $138,500 (no more than $65,500 may be in subsidized Stafford loans).These totals include Stafford loans received for undergraduate study. For students receiving Health Education Assistance Loans (HEAL), total borrowing may not exceed $189,125.
