|
Stafford Loans are the most common federal loan for students. Any undergraduate or graduate student enrolled at least half-time in a participating institution can apply regardless of need, by filling out a
For students, Stafford Loans offer an advantage over other kinds of loans because of their low interest rates, grace period, government subsidization and flexible payment options. Interest rates for 2005-06 were 5.3% (lower during grace and deferral periods), and are adjusted annually on July 1. They are capped at 8.25%. Interest begins accruing after graduation, or if the student drops below half-time enrollment or leaves school; repayment begins six months later and usually takes 10-30 years. During grace and deferral periods, the government pays the interest on loans that were awarded on the basis of need (subsidized loans).
The amount of the loan depends on the year in school and type of loan (subsidized or unsubsidized). For undergraduates, the maximum is about $10,500 annually; graduate students can be awarded up to $18,500 annually.
A fee of up to 4% of the amount of the loan is charged, deducted proportionally when each disbursement is made.
There are two types of Stafford Loan: the Federal Family Education Loan (FFEL) Program and the William D. Ford Federal Direct Loan (Direct Loan) Program. FFEL funds come from a lender, bank or credit union, and the applicant chooses his or her own lender. Direct Loan funds come from the federal government and offer a slightly longer payback period. More information about Stafford Loans can be found on the Federal Student Aid web site.
Last updated: April 26, 2006.
