Stafford Loan Program

An In Depth Look at the Federal Stafford Loan Program

If you’re thinking about going to college, it’s a good idea to look into student loans. There are a variety of student loans available, and you should choose yours carefully. You want to find a loan that will suit your situation best. This article is going to go in depth on the Federal Stafford Loan Program. We will talk about the different two types of Stafford Loans. We’ll also talk about how much a student can borrow. We’ll touch on the interest rates and various fees as well. Finally, we will discuss eligibility requirements and loan repayment options.

Subsidized and Unsubsidized Stafford Loans

The Federal Stafford Loan program has two types of loans available for borrowers. They are called a Subsidized Loan and an Unsubsidized Stafford Loan. Any borrower can be eligible for one of both loans, and the borrower’s school will be the deciding factor.

  • Subsidized Stafford Loan. These are a need or financial-based loans. You don’t pay anything while you are in school and for six months after you graduate. The Federal Government will be paying your interest for this period.
  • Unsubsidized Stafford Loans. This loan is not for all students. It bases the borrower’s eligibility on estimated cost of attendance, financial aid awards, and the borrower’s year in school. Borrowers are responsible for paying all of the interest that accrues while they are in school. They will continue paying this interest during the grace period after they graduate as well. Borrowers can take out both types of Stafford loans each year as long as they don’t go over the limit.

How Much Can Someone Borrow Per Year?

A borrower’s loan limit depends on a few factors. These loans are graduated, and the longer you’re in school, the more you can borrow per year.

If you’re a dependent undergraduate student you can borrow:

  • $5,500 for your first year. You can only borrow this amount if your program lasts one full year. Of the $5,500, only $3,500 can come from Subsidized loans.
  • $6,500 for your second year. You can only borrow the full amount if you’ve successfully finished your first year. The remaining course also has to go another whole year. Of the $6,500, only $4,500 can come from Subsidized loans.
  • $7,500 for your third year. You can only borrow the full amount if you’ve successfully finished your first two years. The remaining course has to go one more entire year as well. Of the $7,500, only $5,500 can come from Subsidized loans.

If your parents don’t qualify for a PLUS loan and you’re a dependent undergraduate student, you may be entitled to more. These amounts apply to independent undergraduate borrowers as well.

  • $9,500 for your first year. You can only borrow this amount if your program lasts one full year. Of the $9,500, only $3,500 can come from Subsidized loans.
  • $10,500 for your second year. You can only borrow the full amount if you’ve successfully finished your first year. The remaining course also has to go another whole year. Of the $10,500, only $4,500 can come from Subsidized loans.
  • $12,500 for your third year. You can only borrow the full amount if you’ve successfully finished your first two years. The remaining course has to go one more entire year as well. Of the $12,500, only $5,500 can come from Subsidized loans.

Total Amounts
If you’re a graduate or professional borrower, you can borrow a maximum of $138,500 over the span of your courses. Of this amount, $65,500 can be from Subsidized loans.

If you’re a dependent student, you can borrow up to $31,000 over your college years. Of this amount, $23,000 can come from Subsidized loans.

If you’re an independent student, you can borrow a maximum of $57,500 over the span of your college years. Of this amount, only $23,000 can be from Subsidized loans.

Interest Rates and Miscellaneous Fees

Both Subsidized and Unsubsidized Stafford Loans come with a fixed interest rate. If you are an independent or dependent undergraduate student, the fixed interest rate is 3.67 percent. If you are at a professional or a graduate level, your interest rate is 5.84 percent.
These loans also charge fees in addition to their interest rates. These additional loan fees range from 1.073 percent to 1.068 percent.

Eligibility Requirements

To be eligible for one of these loans, you must be either full or part time status in school. You can’t fall below the part time requirements. You must be a citizen of the United States or a permanent resident. At the time you apply, you are not allowed to be in default on any loan or grant. Your school of choice must permit the use of the Stafford Loan Program as well. Finally, you have to prove you have a financial hardship. This means your family can’t make more than $50,000 in combined income annually.

How Do You Apply?

You apply for this loan online using the Federal Application for Student Aid (FAFSA). You will need to get all of the documents that are required by the application page. These materials will ensure you fill out the FAFSA correctly. Once you apply, you’ll get a letter from the student aid office. This letter will list your loan amounts and give you the option to accept them. If you accept them, your school will receive the funding. They will deposit any leftover funding into your bank account.

The Stafford Loan Repayment Process

Once you graduate, drop out or go below part time status, you have a six month grace period. During this period, you’ll pay nothing if you took out a Subsidized loan. If you took or an Unsubsidized loan, you’d continue to pay interest. Once the grace period is up, you’ll begin paying back your loans. Most of these loans are on a ten-year plan for repayment. The payment is due once a month, and you can sign up for automatic payments. You can also mail a money order in as well.

This article talked about the difference between Subsidized and Unsubsidized Stafford Loans. We touched on the maximum amount you can borrow per year. We also talked about the overall amount you can borrow from each type of loan. Lastly, we discussed interest rates and fees, along with eligibility requirements. Finally, we talked about how to apply and repayment options.

Monica Kowollik

Director at CreditFast.com
Monica has covered credit card and personal finance news for over 15 years. From an early age, she developed an interest in financial literacy and saving money. Monica hopes to help others to improve their personal finances one article at a time.

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