| A Stafford loan is a loan product offered to students | | | | Consolidation Loans that are available to students and |
| enrolled in American institutions of higher education to | | | | former students with multiple loans. Specialized |
| help finance their education. The loans are offered | | | | consolidation lenders and student loan providers |
| under Title IV of the Higher Education Act of 1965 | | | | compete on various incentives to attract customers. |
| (with subsequent amendments) and are therefore | | | | Stafford Loans are available through US Department |
| guaranteed by the U.S. Department of Education either | | | | of 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 of | | | | Stafford Loans is that they're easy to qualify for in |
| the US Government, they are offered at a lower | | | | most cases. |
| interest rate than the borrower would otherwise be | | | | Stafford Loan Eligibility |
| able to get for a private loan. On the other hand, there | | | | Stafford loans are available to students who are any |
| are strict eligibility requirements and limits on Stafford | | | | of the following: |
| loans, and they get special treatment in personal | | | | Full-time |
| bankruptcy cases. Students applying for a Stafford | | | | Part-time |
| loan must first complete a FAFSA. | | | | Graduate |
| Stafford loans are available to students either directly | | | | Undergraduate |
| from the United States Department of Education | | | | You must be a US citizen, national, permanent resident, |
| through the Federal Direct Student Loan Program | | | | or have other special status. In addition, you must be |
| (FDSLP, also known as Direct) or from a private | | | | enrolled at least half-time at an eligible institution. |
| lender through the Federal Family Education Loan | | | | Stafford Loan Highlights |
| Program (FFELP). | | | | Borrowers who use Stafford Loans may enjoy: |
| No payments are expected on the loan while the | | | | No credit check needed |
| student is enrolled full time, and for six months after the | | | | Flexible repayment options (including consolidation) |
| student has either graduated or dropped out of a | | | | No 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-school | | | | If 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 to | | | | You must repay the loan |
| students based on demonstrated financial need; with | | | | Loans issued after July 2006 have a fixed 6.8% APR |
| these loans, interest is paid by the federal government | | | | Interest may be subsidized if you can demonstrate |
| while the student is enrolled and during the grace | | | | need |
| period. | | | | Interest may be capitalized (added to the back of the |
| Interest on Stafford loans was previously based on an | | | | loan) if you decide not to pay while in school |
| adjustable formula, in which rates were set annually | | | | How to Get a Stafford Loan |
| based on the prevailing 91-day Treasury bill. As of July | | | | To get the ball rolling, you’ll need to: |
| 1, 2006, however, all Stafford loans are issued with a | | | | Complete the FAFSA process |
| fixed interest rate. For direct loans and most loan | | | | Choose 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 providers | | | | How Much Can I Borrow? |
| are foregoing portions of the margin they are entitled | | | | The maximum loan depends on your status and can |
| to under the Federal program, offering interest rates | | | | range from $2625 to $18500. |
| lower than the standard rate. Many are also offering | | | | Ask 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 reduced | | | | students and graduate students can borrow the most. |
| interest rates, expecting others to follow with time. | | | | For Additional Information |
| Collectively, interest rate reductions, principal reductions | | | | Your Financial Aid office is really the best place to go |
| and origination fee discounts are known as Borrower | | | | with 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 College | | | | The Federal Student Aid Direct Loans site |