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Federal Stafford Loans

Frequently Asked Questions about Federal Stafford Loans

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What is a Stafford Loan?

Federal Direct Stafford loans are loans offered by the federal government to assist you with higher education expenses. The loan comes in two types: subsidized and unsubsidized. Stafford loans are provided to students through the Department of Education, and are available at Title-IV-eligible schools. Applicants must be U.S. citizens or permanent legal residents.

What is the difference between unsubsidized and subsidized loans?

Subsidized Stafford Loans are awarded based on financial need. They are interest-free until you begin repayment, which begins six months after you graduate or drop your enrollment to below half-time. You will also not be charged interest during periods of deferment. During these times, the federal government “subsidizes,” or pays, the interest.

Unsubsidized loans are not awarded based on financial need; any eligible student can take out Unsubsidized Stafford Loans. For these loans, interest begins to accrue immediately, and students are responsible for paying the interest, even while enrolled.

What are the maximum Stafford Loan amounts?

Stafford loan limits vary depending on whether the loan is subsidized or unsubsidized, as well as by grade level and dependency status. Your loan awards cannot exceed the total cost of your education. For more information, consult the Stafford Loan limits chart .

How much should I borrow?

Determine the total cost of all your education-related expenses. Subtract the amount of financial aid you have already been awarded. The result is what you should borrow through a Stafford Loan.

Am I eligible for a Stafford Loan?

In order to be eligible for a Stafford Loan, students must:

  • Complete and submit the Free Application for Federal Student Aid (FAFSA)
  • Have financial need as determined by the school (applies to Subsidized Stafford Loans only)
  • Be a US citizen or national, a US permanent resident, or eligible non-citizen
  • Be enrolled or plan to enroll at least half-time (students do not have to attend school full-time to be eligible)
  • Be accepted for enrollment or attend a Title-IV-eligible school
  • Not be in default on any education loan or owe a refund on an education grant

Some students may be eligible to receive an Unsubsidized Stafford Loan only. For more information about this, contact your school’s financial aid office.

What can Stafford Loans be used for?

Stafford Loans can be used to cover a student’s total cost of attendance (COA). This generally includes tuition, room and board, books, and other education-related expenses required by the university. Both on and off-campus housing is covered by Stafford Loans.

What is the Stafford Loan application deadline?

The application for all federal student aid, including Stafford Loans, is the FAFSA. FAFSA deadlines differ according to state and school, although they are typically between January 1 and June each year. There is no specific deadline to request Stafford Loans once your application is submitted.

When are Stafford Loan funds disbursed?

Stafford loan funds are disbursed directly to the school in at least two installments; no payment will exceed half of your total loan amount. Generally these installments are made in the fall and winter semesters. The money will be used to pay tuition and fees first, and any leftover funds will be given to the student either through their account or via check. As required by federal regulations, first-year students do not have their first disbursement made until 30 days after the start of the semester. All students are notified when their loan funds arrive at the college.

What are the Stafford Loan interest rates?

The federal government sets the interest rate July 1st of every year. The interest rates for the current academic year are 6.8% for subsidized loans and 6.80% for unsubsidized loans. For more detail, please see this chart with Stafford Loan interest rates.

You can start to make interest payments on the loan while you are still in school, which will significantly reduce the overall cost of the loan. You may also postpone payment on the loan interest until you enter the repayment period on the initial amount borrowed.

How do I apply for a Stafford Loan?

To apply for a Stafford Loan, you must first complete the FAFSA or Renewal FAFSA (for returning students). After the FAFSA is processed, your school will review the results and send you an award letter informing you of your loan eligibility. Once you receive your award letter, you should apply for the Stafford Loan as well as look at other federal student loans or private student loans.

Do I have to apply for a Stafford Loan every academic year?

Yes. This is because each year, the amount of aid for which you are eligible is determined by your FAFSA. Federal Stafford Loans do not “renew” automatically.

Can I receive a Stafford Loan if I have poor credit?

The Stafford Loan is a need-based loan, not a credit-based loan. Your eligibility is governed by your FAFSA submission, not your credit report.

However, if you are currently delinquent or have previously defaulted on any federal student loans, you may not be eligible to receive any form or federal financial aid. Contact the US Department of Education for more information about rehabilitating your delinquent or defaulted education loans.

Are there any fees for Stafford Loans?

Stafford loans currently have up to a 1.0% origination fee for each loan disbursement.

Can I cancel a Stafford Loan?

Yes. Your school is required to notify you in writing any time your account is credited with your loan proceeds. You may cancel all or a portion of your loan if you inform your school within 14 days after the date that your school sends you this notice or by the first day of the payment period, whichever is later. You will generally have to fill out a loan cancellation form with your school. To make sure that the loan is cancelled you should follow up with the lender you applied with to make sure that your school returned the funds.

What is a loan entrance counseling session?

Loan entrance counseling explains your rights and responsibilities when borrowing a Federal Stafford Loan. You must complete this loan counseling before an initial Stafford Loan is processed and your funds are disbursed.

How long does it take for my loan to be processed?

The loan process, including the FAFSA review, eligibility review, and approval from the lender can take from nine to ten weeks.

What is deferment?

Deferment is temporarily postponing a repayment.

Are graduate students eligible for Subsidized Loans?

Subsidized Loans are only available to undergraduate students. Graduate and professorial students will receive their maximum federal direct loan eligibility in Federal Direct Unsubsidized Loans.