Federal Stafford Loan Overview

November 20, 2011

Federal Stafford Loan

For those of you who don’t know much about the Federal Stafford Loan Program, it is part of the Federal Family Education Student Loan Program (FFESLP), that is funded by the governement, and can be applied for by filling out a Free Application for Federal Student Aid (FAFSA) where the loan amount you will get will be based off of your Expected Family Contributino (EFC). Stafford Loans provide the eligible applicant with the benefit of having a fixed interest rate throughout the life of their loan repayment, meaning if you begin paying on a 5 percent interest rate, you will pay every single payment on 5 percent until you have paid the loan back in it’s entirety. Federal Stafford Loans are offered for both undergraduate as well as graduate students, which below is an overview on each category.

Federal Stafford Loan

Federal Stafford Loan For Undergraduates

When an undergraduate receieves financial aid through the form of a Federal Stafford Loan, they can borrow form limits that range from $$2,000 to $12,500 each year of school which limits increase every year of school completed, which depending upon which year a student is in, and will have a loan experience that includes the below points, which are all applicable if a student agrees to enroll at in a minimum of a half time school schedule:

  • Loan deferment while in school, meaning the student doesn’t have to pay the loan off while in school.
  • Applicants do not have to have a good credit score, as Stafford Loans are not granted based of your credit score.
  • Rates start at as low as 3.4 percent, which are the lowest out of all the federally funded grant programs.
  • Loans come in the form of both subsidized, which loans are granted on the degree of your financial need as well as unsubsidized, meaning it is not based off of financial need.
  • Interest is paid starting when the student either graduates or drops out, and does not accrue, or buid up while they are in school.

Federal Stafford Loan For Graduates

For graduates applying for Stafford Loans, they are able to take out up to $22,500 per school year and also come in the form of subsidize and unsubsidized, where students again have to be enrolled in at least a half time school schedule. The loan experience will include:

  • Not having to pay loan payments while they are in school and begin usually at 6 months after graduation or dropping out.
  • No interest is charged while in school for subsidized loans, but for unsubsidized Stafford Loans, interest is either to be paid while you are in school, which is highly suggested, or let is accrue and pay it when you graduate. For examples sake, if one takes out $10,000 dollars, they will have to pay about $750 dollars in interest, which will accumulate on the loan total and one will have to pay interst on that as well.
  • Interest rates that are fixed and start at a minimum interest rate of 6.8 percent.

For the subsidized Staffor Loans, it is said that two thirds of the loans go to students who have Adjusted Gross Incomes that do not exceed $50,000 per year, while one fourth go to those who have Adjusted Gross Incomes between the range of $50,000 to $100,000. So if you meet these requirements, there is a good chance that you will be able to qualify for the subsidized Stafford Loan, which provides the benefit of coming with a much lower interest rate. But if not, you can still receive funding through the unsubsidized option. For either option, a 1 percent loan activation fee will be charged, where once you qualify for the loan, the money will be sent to your school and you will deal with your schools main office when you need funds for schooling costs.

For repayment of Federal Stafford Loan debt, there are 5 different repayment options, which include the standard repayment, extended repayemnt, graduated repayment, Income Based Repayement (IBR) and Income Contigent Repayment (ICR).



Category: Student Loan Database, Student Loans - Unsubsidized

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