Stafford Loan

Stafford Loans (for students)

Page 1
What are Stafford Loans?

Federal Stafford Loans are low cost, long term education loans to students to help pay for the cost of higher education. There are 2 types of Federal Stafford Loans:

1) Federal Direct Stafford - Ford Loans (Direct Subsidized Loans)
2) Federal Direct Unsubsidized Stafford - Ford Loans (Direct Unsubsidized Loans)

The United States Department of Education administers the:

A) Federal Family Education Loan (FFEL) Program (which comes from private lenders such as banks)
B) William D. Ford Federal Direct Loan (DL) Program (which comes directly from the United States government)

Both of these programs are generally known as Stafford Loans (for students) and PLUS Loans (for parents).

Schools generally participate in either the FFEL or Direct Loan program but sometimes participate in both. Under the Direct Loan Program, the funds for your loan come directly from the federal government. Funds for your FFEL will come from a bank, credit union, or other lender that participates in the program. Eligibility rules and loan amounts are identical under both programs, but repayment plans differ somewhat.

For either type of loan, you must fill out a Free Application for Federal Student Aid (FAFSA). (For more information about filling out the FAFSA go to: www.fafsa.ed.gov/).

After your FAFSA is processed, your school will review the results and will inform you about your loan eligibility. You also will have to sign a promissory note, a binding legal document that lists the conditions under which you're borrowing and the terms under which you agree to repay your loan.

The amount of money you can borrow depends on your year in school and whether you have a subsidized or unsubsidized Direct or FFEL Stafford Loan. A subsidized loan is awarded on the basis of financial need. If you're eligible for a subsidized loan, the government will pay (subsidize) the interest on your loan while you're in school, for the first 6 months after you leave school, and when you qualify to have your payments deferred. Depending on your financial need, you may borrow subsidized money for an amount up to the annual loan borrowing limit for your level of study. You might be able to borrow loan funds beyond your subsidized loan amount or even if you don't have demonstrated financial need. In that case, you'd receive an unsubsidized loan. Your school will subtract the total amount of your other financial aid from your cost of attendance to determine whether you're eligible for an unsubsidized loan. Unlike a subsidized loan, you are responsible for the interest from the time the unsubsidized loan is disbursed until it is paid in full. You can choose to pay the interest or allow it to accrue (accumulate) and be capitalized (added to the principal amount of your loan). Capitalizing the interest will increase the amount you have to repay.

You can receive a subsidized loan and an unsubsidized loan for the same enrollment period as long as you don't exceed the annual loan limits.

Page 2 How much can you borrow?
Page 3 Interest Rates, Fees, and Repayment

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