Federal Stafford Loan

What are Stafford Loans?
The Federal Stafford Loan is an affordable student loan for undergraduate and graduate students. Stafford Loans come with variable interest rates and are available as either subsidized or unsubsidized loans.
 
Subsidized: A subsidized loan is awarded on the basis of financial need. You won't be charged any interest before you begin repayment or during deferment periods. The federal government "subsidizes" the interest during these periods.
 
Unsubsidized: An unsubsidized loan is not awarded on the basis of need. You'll be charged interest from the time the loan is disbursed until it's paid in full. If you allow the interest to accrue (accumulate) while you're in school or during other periods of nonpayment, it will be capitalized. This means the interest will be added to the principal amount of your loan, and additional interest will be based on that higher amount. 

Who can get a Stafford Loan?

If you're a
regular student enrolled in an eligible program at least half time, you may receive a Stafford Loan. You must also meet other general eligibility requirements.

How much can I borrow?
The amounts you can borrow depend on your grade level in school and on the type of student you are: dependent undergraduate, independent undergraduate (or a dependent undergraduate whose parents are unable to get a PLUS Loan), or a graduate student. First-year independent students can receive as much as $9,500. First-year dependent students can receive as much as $5,500.


How do I get this loan?
You apply using the FAFSA or Renewal FAFSA, just the way you would for other federal student aid. Then, you sign a
promissory note that you'll get from your financial aid office. The promissory note is a binding legal document; when you sign it, you're agreeing to repay your loan under certain terms. Read the note carefully and save it.
 
How will I receive my Stafford Loan?
Your school will disburse your loan in at least two installments; no installment will be greater than half the amount of your loan.

Your loan money must first be used to pay for your tuition, fees, and room and board. If loan funds remain, you’ll receive them by check or in cash, unless you give the school written permission to hold the funds until later in the enrollment period.

If you’re a first-year undergraduate student and a first-time borrower, your first disbursement can't be made until 30 days after the first day of your enrollment period. That way, you won't have to repay the loan if you withdraw during the first 30 days of classes. (However, you might owe money to the school for a portion of tuition or other fees.) 

Can I cancel the loan if I change my mind?

Yes. Your school must notify you in writing whenever it credits your account with your Stafford Loan funds. You may cancel all or a portion of your loan if you inform your school within 14 days after the date your school sends you this notice, or by the first day of the payment period, whichever is later. (Your school can tell you the first day of your payment period.) If you receive Stafford Loan funds directly by check, you may refuse the funds by returning the check.


What’s the interest rate?

The interest rate is fixed at 3.86 percent. Some students may qualify for a lower subsidized rate.

If you have subsidized loans, you won’t be charged interest while you’re enrolled in school at least half time, during a grace period, or during authorized periods of deferment. Interest will accrue (accumulate) when you enter repayment or a period of forbearance.

If you have unsubsidized loans, you'll be charged interest from the day the loan is disbursed until it's paid in full, including in-school, grace, deferment, and forbearance periods. You can pay the interest during these periods, or it can be capitalized. 
 
Other than interest, is there any charge to get the loans?
Fees are deducted proportionately from each loan disbursement. (Part of the fee is for insurance used to pay off loan defaults; the rest reduces the cost of the loan to the government.) Because of this deduction, you'll receive slightly less than the amount you're borrowing.

When do I pay back these loans?

After you graduate, leave school, or drop below half time enrollment, you have a six-month grace period before you begin repayment. 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. As mentioned, you can either pay the interest or it will be capitalized.

Your lender will send you information about repayment, and you’ll be notified of the date repayment begins. However, you're responsible for beginning repayment on time, even if you don’t receive this information. Failing to make payments on your loan can lead to default.
 
How do I pay back my Stafford Loans?
You will repay your Direct Loan to the Dept. of Education at our Direct Loan Servicing Center. Direct Loan borrowers can view and pay their bills online, using their PIN, through the Servicing Center Web site: www.dl.ed.gov.

Stafford Loans offer four 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.

If you don't choose a repayment plan when you first begin repayment, you'll be placed under the Standard Repayment Plan. You can change plans to suit your financial circumstances. Under the Direct Loan Program, you can change plans anytime.


Are there any tax incentives available for paying back these loans?
Yes, there are tax incentives for certain higher education expenses, including a deduction for student loan interest for certain borrowers. This benefit applies to all loans taken out to pay for postsecondary education costs. IRS Publication 970, Tax Benefits for Higher Education, explains these credits and other tax benefits. You can find out more at www.irs.gov or by calling the IRS at 1-800-829-1040. TTY callers can call 1-800-829-4059.
 
Is it ever possible to postpone repayment of my loan?
Yes, under certain conditions, you can receive a "deferment" or "forbearance" on your loan, as long as the loan isn't in default. A deferment allows you to temporarily postpone payments on your loan. If you have a subsidized loan, you won't be charged interest during the deferment. If your loan is unsubsidized, you'll be responsible for the interest. You can pay the interest as it accrues (accumulates), or it will be capitalized and the amount you'll have to repay will increase.

For information on deferments available on loans received before that date, FFEL Stafford borrowers should contact the lenders or agencies holding the loans. Direct Stafford Loan borrowers can contact the Direct Loan Servicing Center at 1-800-848-0979. TTY users can call 1-800-848-0983. Or, you can go online at www.dl.ed.gov.
 
If you're temporarily unable to meet your repayment schedule, but you're not eligible for a deferment, your lender might grant you forbearance for a limited and specified period. During forbearance, your payments are postponed or reduced. Whether your loans are subsidized or unsubsidized, you'll be charged interest during a period of forbearance. If you donít pay the interest as it accrues, it will be capitalized.
 
Deferment and forbearance are not automatic. If you have a Direct Stafford Loan, you must contact the Direct Loan Servicing Center to request either option. If you have a FFEL Stafford Loan, you must contact the lender or agency that holds your loan. You might have to provide documentation to support your request. You must continue making scheduled payments until youíre notified that the deferment or forbearance has been granted. Not making payments on your loan will have a negative effect on your credit rating, and your loan could go into default.
 
Is it ever possible to have my Stafford Loan discharged (canceled)?
Yes, in certain circumstances. A discharge releases you from all obligations to repay the loan. A complete list of cancellation provisions is given below.
 
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 reasonóbecause the school closed, for example). Cancellation also is not possible because you didn't like the school or the program of study, or you didn't obtain employment after completing the program of study.
 
For more information about discharge, Direct Stafford Loan borrowers should contact the Direct Loan Servicing Center. FFEL Stafford Loan borrowers should contact the lenders or agencies holding their loans.
 
For More Information
Contact your school's financial aid office for more details about the Federal Stafford Loan.