All About Stafford Loans

Student Guide to the Perfect Student Loan

No loan is perfect, all must be repaid, but the Federal Stafford Loan comes pretty close to perfect. Stafford Loans are the most common student loan and, even better, almost everyone qualifies for aid.

Features of the Stafford Loan:

  • Low interest
  • Easy to qualify
  • Undergraduate and graduate students may qualify
  • Government pays the interest on subsidized Staffords while student is in school
  • Students qualify for higher annual limits each year
  • No credit check required
  • Six-month grace period following graduation

What is the Stafford Loan?

Stafford Loans are government guaranteed loans available either through the Federal Direct Student Loan program or through a lender that participates in the Federal Family Education Loan Program (FFELP). Loans are designed to offer almost every American student some form of financial, low-cost aid.

Types of Stafford Loans:

  • The Subsidized Stafford Loan is need-based. Students are not required to repay interest while in school or during the 6-month grace period immediately following graduation. The government pays the interest. Once the 6-month grace period is up, borrowers must begin repayment according to the loan terms.
  • The Unsubsidized Stafford Loan is non-need-based and awarded to many more students than the subsidized. Many students actually carry both types of Stafford Loans. Student borrowers are responsible for accrued interest as soon as the loan is disbursed, but may opt to defer these payments until after graduation. Like the subsidized Stafford Loan, the unsubsidized Stafford is bundled with a 6-month grace period. After this borrowers must begin repayment of the loan according to the terms of the promissory note.

Stafford Loan Interest Rates and Fees

Any Stafford Loans originated prior to June 30, 2006 have a variable interest rate, adjusted annually and capped at 8.25%. Stafford Loans originated after July 1, 2006 are fixed with a 6.8% interest rate. By 2012 the fixed interest rate on subsidized Stafford Loans will be reduced to 3.4% again ensuring that these are some of the lowest-cost loans available.

Qualifications for a Stafford Loan

The old adage, you never know until you try is fitting here. Even if you think you may not be eligible for the Stafford loan, you should still fill out the FAFSA. You never know what other sort of financial aid you may qualify for.

Basic eligibility requirements for the Stafford Loan include:

  • Complete the FAFSA
  • Must be a U.S. citizen or permanent resident
  • Enrolled at least half-time in college.
  • For subsidized Stafford Loans you must meet the income requirements for need-based aid.

Applying for a Stafford Loan

You must complete a FAFSA to qualify for any type of Stafford Loan. Students are notified if they are approved for need-based subsidized Stafford Loan funds. You are free to apply for unsubsidized Stafford Loan funds over and above any subsidized funds for which you’ve been approved.

Once you choose a student loan lender you will complete the Master Promissory Note for the Stafford Loan. This document details all the fine print of the loan, including your repayment responsibilities and terms.

Repayment of Stafford Loans

For both subsidized and unsubsidized Stafford Loans you have a standard 6-month grace period before you must begin repayment. During this time you are given information on repayment and reminded of loan terms and details of payment.

At any point you have problems repaying a federal student loan, you may apply for a federal consolidation loan.

Stafford Loans are some of the most affordable student loans you could possibly qualify for. Make absolutely certain you complete the FAFSA in order to qualify for all the federal aid possible.