Stafford Loan
The Stafford Loan, designed by the Federal Direct Student Loan Program (FDSLP), is a student loan that is offered in institutions of higher education. There are two variations, the FFELP or the Federal Family Education Loan Program and the FDSLP or the Federal Direct Student Loan Program.
The Family Education Loan Program loans are loans that are provided by a few loan associations and are guaranteed by the federal government. On the other hand, the Federal Direct Student Loan Program loans, better known as ‘Direct Loans’, are loans provided to the students as well as their parents directly by the US Government.
Any Stafford loan is either unsubsidized – which means that you have to pay all of the loan interest either at that time itself or have it put off until after you graduate, or subsidized – which means that the government takes care of paying the interest as long as you’re still at school.
Subsidized Stafford Loan
This loan is basically designed for students with financial requirements. The amount you can borrow is administered by your school itself, which will also overlook into the Free Application for Federal Student aid (FAFSA). So, even if you run short of money, you can always put the money you have into the certificate of deposit (CD) and earn interest. You needn’t worry about the interest (that is low), as you will be able to meet your needs by the time you close out the CD.
Unsubsidized Stafford Loan
For this type of loan, any student irrespective of need is eligible. Here, your school administers the amount that is required and the interest is counted from the first day that the money is sent. You can put off your payments until graduation by capitalizing the interest i.e. increasing your loan cost by adding interest payments to your loan balance. The interest never goes beyond 7% during the loan period.
Stafford loans Limits
There are certain limits pertaining to Stafford loans regarding the amount to be borrowed, applicable for both subsidized and unsubsidized loans. These loans vary by each year in school.
| Academic Year | Depenent | Independent |
|---|---|---|
| Stafford Loan Limits | ||
| 1st Year | $3500 | $7500 |
| 2nd Year | $4500 | $8500 |
| 3rd Year | $5500 | $10500 |
| Graduate Professional | - | $20500 |
Stafford loans Interest Rates
The interest rates of Stafford loans are decided and fixed by the government. And most importantly, unlike a private student loan, the interest rate does not vary with your credit score.
| Academic Year | Subsidized | Unsubsidized |
|---|---|---|
| Stafford Loan Interest Rates | ||
| 2010-11 | 4.5% | 6.8% |
| 2011-12 | 3.4% | 6.8% |
| 2012-13 | 6.8% | 6.8% |
Stafford Loan Eligibility
One must have completed the Free Application for Federal Student Aid (FAFSA) to attain the loan. This is mandatory for both subsidized and unsubsidized loans.
Stafford Loan Application Procedure
Stafford loan application starts with the FAFSA form. Fill out your FAFSA and submit it. You can use the Lender Codes Database (Lender Code is a six digit identification number assigned by the US Department of Education to lenders participating in the Title IV higher education loan programs) to find the lender codes of participating student loan providers. Keep in mind that if you are attending a school participating in the Federal Direct Loan Program, then you do not have to take your federal student loan funds from private lenders as your school will obtain them directly.
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