Stafford loan

A Stafford loan is a loan product offered to studentsConsolidation Loans that are available to students and
enrolled in American institutions of higher education toformer students with multiple loans. Specialized
help finance their education. The loans are offeredconsolidation lenders and student loan providers
under Title IV of the Higher Education Act of 1965compete on various incentives to attract customers.
(with subsequent amendments) and are thereforeStafford Loans are available through US Department
guaranteed by the U.S. Department of Education eitherof Education funding programs. This page covers the
directly or through guarantee agencies.basics of Stafford Loans. A unique characteristic of
Because the loans are guaranteed by the full faith ofStafford Loans is that they're easy to qualify for in
the US Government, they are offered at a lowermost cases.
interest rate than the borrower would otherwise beStafford Loan Eligibility
able to get for a private loan. On the other hand, thereStafford loans are available to students who are any
are strict eligibility requirements and limits on Staffordof the following:
loans, and they get special treatment in personalFull-time
bankruptcy cases. Students applying for a StaffordPart-time
loan must first complete a FAFSA.Graduate
Stafford loans are available to students either directlyUndergraduate
from the United States Department of EducationYou must be a US citizen, national, permanent resident,
through the Federal Direct Student Loan Programor have other special status. In addition, you must be
(FDSLP, also known as Direct) or from a privateenrolled at least half-time at an eligible institution.
lender through the Federal Family Education LoanStafford Loan Highlights
Program (FFELP).Borrowers who use Stafford Loans may enjoy:
No payments are expected on the loan while theNo credit check needed
student is enrolled full time, and for six months after theFlexible repayment options (including consolidation)
student has either graduated or dropped out of aNo prepayment penalty
full-time program.Loan forgiveness for some teachers
Stafford loans have a dual structure interest rate:Details on Stafford Loans
interest rates are lower when the student is in-schoolIf you’ll use a Stafford Loan, be aware of
and for the grace period. Once they are in repayment,the following:
the interest rate increases.You pay a fee (but it may be covered by your lender)
Stafford loans are available both as subsidized and
unsubsidized loans. Subsidized loans are offered toYou must repay the loan
students based on demonstrated financial need; withLoans issued after July 2006 have a fixed 6.8% APR
these loans, interest is paid by the federal governmentInterest may be subsidized if you can demonstrate
while the student is enrolled and during the graceneed
period.Interest may be capitalized (added to the back of the
Interest on Stafford loans was previously based on anloan) if you decide not to pay while in school
adjustable formula, in which rates were set annuallyHow to Get a Stafford Loan
based on the prevailing 91-day Treasury bill. As of JulyTo get the ball rolling, you’ll need to:
1, 2006, however, all Stafford loans are issued with aComplete the FAFSA process
fixed interest rate. For direct loans and most loanChoose a lender – ask your Financial Aid
providers, the rate is currently set at 6.80%.office for suggestions
As the new rate goes into effect, some loan providersHow Much Can I Borrow?
are foregoing portions of the margin they are entitledThe maximum loan depends on your status and can
to under the Federal program, offering interest ratesrange from $2625 to $18500.
lower than the standard rate. Many are also offeringAsk your Financial Aid office for details. In general
price incentives related to payment history, direct debit,“independent” (or self-supporting)
etc. MyRichUncle was the first to announce reducedstudents and graduate students can borrow the most.
interest rates, expecting others to follow with time.For Additional Information
Collectively, interest rate reductions, principal reductionsYour Financial Aid office is really the best place to go
and origination fee discounts are known as Borrowerwith questions. You can also visit:
Benefits.The Department of Education’s loan page
In addition, in repealing the Single Holder Rule, Congress(where you can view the Student Guide)
also allows loan providers to compete for CollegeThe Federal Student Aid Direct Loans site