Stafford Loans


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Stafford Loans, FFEL and Direct Loans!

Stafford Loans are student loans administered by the U.S. Department of Education. There are two versions of the Stafford Loan. Through the Direct Loan Program, you will receive your funds directly from the Federal Government. This is also known as the William D. Ford Federal Direct Loan Program. If you are receiving your loan through the Federal Family Education Loan (FFEL) Program then a bank, credit union or other lender will provide your funds.

Which type of loan is available may vary with the school. Some use Direct, some FFEL while others may use both types. The loan amounts and conditions are the same for either program.

You must fill out a FAFSA form to be considered. Once the FAFSA has been processed, the school will inform you of your eligibility for the Stafford Loan. If you are to receive a loan, you will have to sign a promissory note that will spell out the terms and conditions of the loan.

Maximum Loan Amounts

The maximum loan amount depends on your year of study and whether you are a dependent student. For dependent students:

  • If you are a first year student in a program that is at least a full year of study, you can borrow up to $5,500. ($3,500 is the maximum subsidized loan)
  • If you are a second year student, the maximum is $6,500. ($4,500 is the maximum subsidized loan)
  • Junior and senior years, you can receive up to $7,500. ($5,500 is the maximum subsidized loan)

For independent students or dependent students whose parents applied for, but were not able to get a PLUS loan:

  • If you are a first year student in a program that is at least a full year of study, you can borrow up to $9,500. ($3,500 is the maximum subsidized loan)
  • If you are a second year student, the maximum is $10,500. ($4,500 is the maximum subsidized loan)
  • Junior and senior years, you can receive up to $12,500. ($5,500 is the maximum subsidized loan)

What is the interest rate? Unsubsidized Stafford loans first disbursed on or after July 1, 2006, have an interest rate fixed at 6.8 percent. The interest rate for subsidized Stafford loans first disbursed on or after July 1, 2009 is fixed at 5.6 percent. Loans issued prior to July 1, 2006, had a variable interest rate and these loans are not affected by the new fixed rate terms.

If you have the financial need, some or all of your Stafford Loans may be subsidized. This means that the federal government will pay the interest on the loans while you are attending school and for up to six months after you leave school. You may also be eligible to get some funds up to the yearly maximum as an unsubsidized loan.
As an example, if you are a first year student and you are eligible for a $1500 subsidized Stafford Loan, you may also borrow $3500 - $1500 = $2000 as an unsubsidized Stafford Loan.

Why didn't I get the whole amount?

When you receive the loan, there is a fee of up to 4% of the amount of the loan. For loans disbursed between July 1, 2009 and June 30, 2010, the fee is 1.5%. In the case of a Direct Loan, the fee goes to the federal government and in the case of a FFEL Loan, the fee is split between the goverment and the agency running the loan program.

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