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Federal Stafford Loans for Undergraduate or Graduate Students

Stafford Loans are type of direct federal loans offered to students enrolled in accredited U.S. educational institutions of higher education with the purpose of giving them assistance in paying for their academic expenses. One of the most important conditions which student must meet in order to qualify for Federal Stafford Loan is to be enrolled at college or university at least on half-time basis. In addition, to be eligible for this student loan plan, applicant must attend a post-secondary institution that participates in Federal Family Education Loan Program, must be a U.S. citizen or national, a U.S. permanent resident or eligible non-resident.

Stafford Loan Plans

Federal Stafford Loans consist of following two types of plans:

  • Subsidized Loans which are introduced as a financial aid for students in economic need, and they are offered without charge of interest during the time student is enrolled in school and during grace period and authorized deferment periods.
  • Unsubsidized Loans which are not based on student’s financial need. Under this loan plan applicant may select option of paying the interest while still attends college or university as well as during grace period and deferment period or can choose to agree for the interest to be added to the main amount of his/her loan. With this alternative the total loan amount student has to repay is higher.

Stafford Student Loan Benefits and Drawbacks

With this student loan plan student can benefit in several ways. Firstly, you will enjoy loan repayment exclusion during the time you are in school, you will start to pay off the loan six months after you finish the school. Secondly, borrowing limit increases in some cases to up to $20,500 per year and finally, Stafford Loan is issued with fixed interest rate. This loan’s interest rate may differ depending on the date the loan was disbursed and in some cases on the education level of the student (undergraduate or graduate).  Additional advantage of Stafford Student Loan is the fact that Interest rates do not fluctuate with default risk, which means that all students are given the equal interest rate apart from of their major or their future career prospects.

Federal Stafford borrowers under certain conditions meet the requirements for the loan forgiveness program, for instance if they work as teachers in designated “low-income” schools, social services or if they join the army.

On the contrary, there are strict eligibility requirements and borrowing limits on Stafford Loan Plan and we recommend that you consider all the borrowing and repaying terms and conditions before you apply.

Stafford Loan Interest Rates

Given the fact that this type of loan is provided by the U.S. Government, it is offered at a lower interest rate than private student loans. Stafford loan interest rate may differ and are established upon the date the loan was disbursed. It also depends on the education level of the student (undergraduate or graduate).  As of 1st July 2006, Federal Stafford Loans are issued with fixed interest rate at 6.80% for unsubsidized loans and with somewhat lower rates for subsidized loans for undergraduate students. Starting from 1st July 2012 the fixed interest rate for all new subsidized loans will be changed to 6.80%.

How to Apply

  1. First step in applying process is to complete a FAFSA
  2. Than your school will evaluate your results and inform you of your Stafford loan eligibility by sending you an award letter
  3. After you have your award letter received you should apply for the Stafford Loan

Your Stafford loan lender will pay out your funds directly to your school. The money will be disbursed in two installments, typically in the fall and winter semesters. Your loan money will be used to pay your education and other school fees. In case you have extra funds left, your school will credit your account or pay you directly based on your school’s policy.

There are also other federal financial aids as well as private loan options available, so you should keep informed about all of these borrowing alternatives in order to choose the best student loan plan for you.

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