The Most Widely Used Loan For College Students.



Stafford loans are low-interest, federally guaranteed student loans available to both eligible undergraduate and graduate students for tuition and other school-related expenses. Stafford Loans are an affordable loan option available for most students to pay for college.  Stafford Loans are the most widely used, low-cost education loans available from the United States Federal government.

Stafford Loans are widely used and low cost!



Stafford Loans are available to students either directly from the United States Department of Education through the Federal Direct Student Loan Program (FDSLP, also known as Direct) or from a financial intermediary (such as Chase, Sallie Mae or Student Loan Corp).  Stafford loans are given to students in the student’s own name. There is no credit check, so students don’t need to worry about finding a co-signer to get money for college or graduate school.  Stafford loan rates are lower than other forms of consumer financing, and repayment is postponed for six months until you leave school or drop below half-time enrollment.  Stafford Loans are backed (guaranteed) by the federal government and have fixed interest rates.

There are two types of Stafford Loans: Direct and FFEL.

Direct Loans

The US government provides Federal Direct Student Loan Program (FDSLP) loans, administered by “Direct Lending Schools”, directly to students and their parents. Many students who apply for the Stafford Loans in either category choose the Direct loan, in which the money comes right from the government and goes directly to the school.

FFELP (Federal Family Education Loan Program)

Private lenders, such as banks, credit unions and savings & loan associations, provide Federal Family Education Loan Program (FFELP) loans.  FFEL loans funded by private lenders are still federally backed and the lenders must follow strict federal loan guidelines.  FFEL program Stafford Loan funds can be used for education-related expenses such as tuition, fees, books, living costs, transportation, childcare, etc. Both the FFEL and Direct Loan programs consist of what are generally known as Stafford Loans (for students) and PLUS Loans (for parents).  For a FFEL Stafford Loan, the lender will send the loan funds to your school. 

Stafford Loan Eligibility

To be eligible for a Stafford loan you must complete a Free Application for Federal Student Aid (FAFSA). Simply fill out the FAFSA form through your educational institution or online at www.fafsa.ed.gov

A Student Is Considered To Be…

To be eligible for Federal Financial Aid a student must be a permanent resident or eligible non-citizen, as applicable. You must have a valid Social Security Number, be attending an eligible school, or accepted for enrollment, as at least a half-time student. If already enrolled, you must maintain satisfactory academic progress in your course of study according to the school’s standards. You must have at least a high school diploma or the recognized equivalent of a high school diploma.

A borrower may not qualify if he or she has defaulted on a federal education loan, owes an overpayment on other federal education aid, has been convicted of a drug-related offense while receiving federal student aid, or is incarcerated.

Subsidized Loans (Need Based)



A Federal Stafford Subsidized Loan is awarded on the basis of financial need and is available through the Federal Family Education Loan Program (FFELP). About 2/3 of subsidized Stafford loans are awarded to students with family AGI (adjusted gross income) of under $50,000, 1/4 to students with family AGI of $50,000 to $100,000, and a little less than 10% to students with family AGI over $100,000.  The interest rate for subsidized Stafford loans first disbursed on or after July 1, 2008 is fixed at 6.0%. 

Non-subsidized Loans (Non-Need Based)

All students, regardless of need, are eligible for the unsubsidized Stafford Loan.  Even though the unsubsidized Stafford Loan is available to all students regardless of financial need, you must still submit the FASFA to be eligible.  For all unsubsidized Stafford loans first disbursed on or after July 1, 2006, the interest rate is fixed at 6.8%.  For unsubsidized Stafford loans, students are responsible for all of the interest that accrues while the student is enrolled in school. 

With the unsubsidized Stafford loan, you can defer the payments until after graduation by capitalizing the interest. 

Repayment

There is a 6-month grace period following graduation or when enrolled less that half-time or leaving school altogether before you must begin repaying your loan.

Both the Direct Loan and FFEL programs offer four repayment plans you can choose from, but the terms differ slightly. Please note: some colleges participate only in the Federal Direct Loan Program, which might mean you do not have a choice of lender.

Information You’ll Receive

Your school must notify you in writing whenever it credits your account with your Direct or FFEL Stafford Loan funds.

Loan Limits



The federal government under Title IV of the Family Education Loan Program sets loan limits. Loan limits vary depending on your student status. 

The loan limits described below apply to both the FFEL and Direct Loan programs and are cumulative.

The limits may be a little confusing because there are two sets of limits for the Stafford loan: a combined base limit for the subsidized and unsubsidized Stafford loan, and an additional limit for just the unsubsidized Stafford loan. 

The program limits are $4,000 per year for undergraduate students and $6,000 per year for graduate students, with cumulative limits of $20,000 for undergraduate loans and $40,000 for undergraduate and graduate loans combined.

Dependent Annual loan limit

·    Freshman $5,500 ($3,500 between subsidized and unsubsidized, plus an additional $2,000 unsubsidized)

·    Sophomore $6,500 ($4,500 between subsidized and unsubsidized, plus an additional $2,000 unsubsidized)

·    Junior or senior $7,500 ($5,500 between subsidized and unsubsidized, plus an additional $2,000 unsubsidized)

Independent Annual loan limit

·    Freshman $9,500 ($3,500 between subsidized and unsubsidized, plus an additional $6,000 unsubsidized)

·    Sophomore $10,500 ($4,500 between subsidized and unsubsidized, plus an additional $6,000 unsubsidized)

·    Junior or senior $12,500 ($5,500 between subsidized and unsubsidized, plus an additional $7,000 unsubsidized)

·    Graduate or professional $20,500 ($8,500 between subsidized and unsubsidized, plus an additional $12,000 unsubsidized)

·    Lifetime limits Undergraduate dependent lifetime limit $31,000 (up to $23,000 may be subsidized)

Undergraduate independent lifetime limit $57,500 (between subsidized and unsubsidized)

Graduate or professional lifetime limit $138,500 (up to $65,000 may be subsidized) or $224,000 (for health professions) for loans first disbursed on or after July 1, 2008. 

Annual limits, which include both the subsidized and the unsubsidized Stafford Loan are as follows: $3,500 in the first year $4,500 in the second year $5,500 in the third year $5,500 in the fourth year. 

Consolidation of your Stafford loans…



In some cases it may be beneficial for you to consolidate one or more of your FF
EL Stafford Loans into a Consolidation Loan. Consolidating loans can be a great way to simplify repayment and lower monthly payments, and Direct Loans can be consolidated with other student loans. When you consolidate your Stafford loans, you are locking in today’s low rates, combining multiple payments into one and lowering your monthly payment. 

Final Things To Consider…



Stafford Loans carry a low, fixed interest rate, which is set by the Federal government.  Stafford Loans are federal student loans for undergraduate and graduate students.  Stafford Loans are the most widely used, low-cost education loans available from the United States Federal government. A Stafford Loan is a great way for you to secure the extra financial aid you require in order to meet your needs for college, university or trade school. 

Most college or university students can secure a Federal Stafford Loan to assist with their financial needs. Getting started as early as possible can be the difference between finding financing or not.

Don’t delay; your future depends on it. Prepare your college finances for a bright future.



By: Frank Richman

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