Stafford Loan

Stafford Loans (for students)

Page 3
Interest Rates, Fees, and Repayment

Interest Rate: The interest rate is variable (adjusted annually on July 1st) but does not exceed 8.25 percent. You'll be notified any time the variable rate changes. For 2003 - 2004, the interest rate for loans in repayment on or after July 1, 1998 was 3.42 percent (lower during grace and deferment periods). The federal government does not charge interest on subsidized loans while borrowers are enrolled at least half time, during a six month grace period, or during authorized periods of deferment.

Fee: There is a fee for a Stafford Loan, you will pay a fee of up to 4 percent of the loan, deducted proportionately from each loan disbursement. For a FFEL Stafford Loan, a portion of this fee goes to the federal government, and a portion goes to the guaranty agency (the organization that administers the FFEL Program in your state) to help reduce the cost of the loans. For a Direct Stafford Loan, the entire fee goes to the government to help reduce the cost of the loans. Also, if you don't make your loan payments when scheduled, you may be charged collection costs and late fees.

Repayment: After you graduate, leave school, or drop below half time enrollment, you will have a 6 month grace period before you begin repayment. During this period, you'll receive repayment information, and you'll be notified of your first payment due date. You're responsible for beginning repayment on time, even if you don't receive this information. Payments are usually due monthly. During the grace period on a subsidized loan, you don't have to pay any principal, and you won't be charged interest. During the grace period on an unsubsidized loan, you don't have to pay any principal, but you will be charged interest. You can either pay the interest or it will be capitalized (added to your principal loan balance, increasing the amount you will repay). You will repay your FFEL Stafford Loan to a private lender or loan servicer. You will repay your Direct Loan to the United States Department of Education's Direct Loan Servicing Center. Both the Direct Loan and FFEL programs offer 4 repayment plans you can choose from, but the terms differ slightly. You will receive more detailed information on your repayment options during entrance and exit counseling sessions your school will provide.

Under certain circumstances, you can receive a deferment or forbearance on your loan, as long as it's not in default. During a deferment, no payments are required. You won't be charged interest for a subsidized FFEL or Direct Stafford loan. If you have an unsubsidized Stafford Loan, you are responsible for the interest during deferment. If you're temporarily unable to meet your repayment schedule (for example due to poor health or other unforeseen personal problems), but you're not eligible for a deferment, your lender might grant you forbearance for a limited and specified period.

Your Stafford Loan can be canceled, but only under a few circumstances. Your loan can't be canceled because you didn't complete the program of study at the school (unless you couldn't complete the program for a valid reason such as the school closed for example) or because you didn't like the school or the program of study, or you didn't obtain employment after completing the program of study.

Page 1 What are Stafford Loans?
Page 2 How much can you borrow?

For more information about filling out the Free Application for Federal Student Aid (FAFSA) go to: www.fafsa.ed.gov/

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