The Federal Stafford Loan is available to undergraduate and
graduate students in two distinct types: subsidized and
unsubsidized. Students may qualify to obtain funds through either
or both types.
The subsidized Stafford is need-based. Eligibility is
determined by each financial aid office based on demonstrated
financial need. The unsubsidized Stafford loan program has
basically the same terms with the exceptions that eligibility is
not based on need and interest accrues even while the borrower is
in school.
Eligibility
Stafford loans are available to students based on confirmation
of several criteria. To be eligible, students must be enrolled at
least half time (usually 6 credits per term), have no unresolved
defaults on federal education loans without being in an approved
repayment program, demonstrate satisfactory academic progress,
and be U.S. citizens or eligible non-citizens.
The subsidized Stafford is awarded to students who have been
determined by the school's financial aid office to have financial
need. Students who do not qualify for the maximum subsidized loan
may take an unsubsidized loan up to the maximum loan amount for
that year (see below for more).
Medical and optometry students may borrow up to $38,500 each
year, while pharmacy students may borrow up to $31,000 a year.
Increased unsubsidized loan limits are based per academic year
not to exceed 9 months. Students enrolled in academic years
exceeding 9 months may be eligible for higher loan limits. In
addition, some medical students are eligible to receive up to an
additional $20,000 in eligibility under the Graduate Stafford
Program. In order to qualify, the medical school must have
originally participated in the HEAL Program. Check with your
Financial Aid Office to determine your eligibility.
Interest Rates
As the program's name indicates, the federal government
subsidizes the interest on the subsidized Stafford loan. You are
not required to pay interest on these loans until after you leave
school.
If you borrow under the unsubsidized Stafford loan program,
you are responsible for the interest while you are in school.
However, most lenders will allow you to defer the interest (not
make any payments) until after you leave school. If you choose to
defer your interest payments, interest will continue to accrue
while you're in school and is added to the principal of the
loan.
The interest rate on federal Stafford loans is calculated by
adding 3.1 percent to the 91-day U.S. Treasury Bill (T-Bill), and
is capped at 8.25% for the life of the loan.
Other Fees
A one-time guarantee fee of one percent is paid to the agency
that insures the loan. A one-time origination fee of three
percent is paid to the federal government to help offset program
benefit costs. Both fees are deducted from the loan proceeds
before they reach your student account.
Stafford Loan Features
If the 91-day T-Bill rate plus 3.1% rises above the 8.25% cap,
you will not pay any additional interest. In cases of economic
hardship, payments may be deferred, extended, or reduced. You may
prepay part or all of your loan at any time without a penalty. To
keep payments at an affordable level, loans may be consolidated
and stretched over a longer repayment period without any
additional fees. In the event of death or permanent disability,
your loan will be forgiven in full.
Credit Requirements
All U.S. citizens (and certain eligible non-citizens) who are
not currently in default on a student loan are eligible for the
Student Loan program. All loan applicants must meet certain
federal standards of creditworthiness. If you have been denied a
Stafford loan, you may also consider obtaining a co-signer who
does meet the minimum requirements.
Applications
You must complete the Free Application for Federal Student Aid
(FAFSA), to be eligible for all forms of federal aid, including
the Stafford Loan. Other financial aid forms, such as the CSS
(College Scholarship Service) PROFILE, are required by some
colleges and universities to award private institutional funds.
Contact the school's financial aid office and inquire about
application requirements and deadlines.
The Stafford Student Loan application process is fairly
straightforward.
First, the student completes and signs the "Student" section
of the Stafford application and hand delivers or mails it to the
school's financial aid office. Then the financial aid office will
request additional forms from the student (if required and not
already received), certify eligibility, and mail the application
to the guarantor or servicer.
The guarantor or servicer disburses the Stafford loan
proceeds, co-payable to the student and the school, and sends
notification of disbursement to the student. The financial aid
office receives the loan funds from the guarantor or servicer,
credits the loan proceeds against any outstanding balances due to
the school, and remits a check for the remainder, if any, to the
borrower.
