All your Stafford Loan questions answered.What are Federal Stafford Loans? Federal Stafford Loans are low-interest student loans to pay for college and university.
Stafford Loans are made by banks and other lenders, like Nellie Mae, under the Federal Family Education Loan Program (FFELP) and are the most common federal student loans. Stafford Loans may be subsidized or unsubsidized.
Subsidized Stafford Loans are awarded based on a student's financial need as determined by the Free Application for Federal Student Aid (FAFSA) process. No interest accrues while you're enrolled in school at least half time, during your grace period, and during authorized deferment.
Unsubsidized Stafford Loans are awarded regardless of financial need and interest is charged immediately upon disbursement. You may pay interest during school or let the interest accrue. Unpaid interest will be capitalized (added to the principal balance) at the start of repayment and at the end of any deferment.
Who can borrow Stafford Loans? To be eligible to receive a Federal Stafford Loan, you must be a full- or half-time degree-seeking student who is a U.S. citizen, national, or eligible noncitizen. A credit check is not required; however, you cannot have defaulted on any prior student loan.
How much can I borrow with Stafford Loans? Your school determines the type and amount of your Stafford Loan each year. There are also annual and aggregate limits set by the federal government.
| First year limit | Second year limit | Other years | Cumulative limit | |
|---|---|---|---|---|
| Dependent undergraduate students | $5,500 | $6,500 | $7,500 | $31,000 |
| Independent undergraduate students | $9,500 | $10,500 | $12,500 | $57,500 |
| Per year | Cumulative limit | |
|---|---|---|
| Subsidized | $8,500 | $138,500* (subsidized and unsubsidized total) |
| Unsubsidized | $12,000 | $138,500* (subsidized and unsubsidized total) |
*Certain health professions students may borrow more than this amount.
What are the interest rates? For loans disbursed July 1, 2008–June 30, 2009, the interest rate on any Stafford Loan for graduate students and on unsubsidized Stafford Loans for undergraduate students is fixed at 6.8% and on subsidized Stafford Loans for undergraduates at 6.0%.
The interest rate for Stafford Loans disbursed after July 1, 2006 is fixed at 6.8%. For Stafford Loans made before July 1, 2006, the variable rate formula previously assigned applies.
Are there any fees? Stafford Loan borrowers may be charged an origination fee of up to 1% of the loan amount and a default fee of up to 1% of the loan amount, which are deducted from each loan disbursement.
What is the application process? Students apply for federal financial aid, including loans, with the FAFSA. After Stafford Loans are awarded, your school's financial aid office will give you promissory note instructions.
What is the Stafford MPN? The Stafford Loan Master Promissory Note (MPN) is a legal agreement between the student borrower and lender, and you must sign one to receive your Stafford Loan funds. It is a "promise to pay."
In most cases, you will sign only one MPN for all of your Stafford Loans received during a 10-year period.
How do I get the MPN? Each financial aid office has its preferred method. Your school will tell you how to get the MPN.
If I only sign an MPN once, how will I know if I'm receiving a Stafford Loan each year? You must apply for a Stafford Loan and other forms of federal student aid each year by completing the FAFSA. After your FAFSA is processed, your school notifies you of your Stafford Loan eligibility. You receive a disclosure statement from your school or lender before the first disbursement of each Stafford Loan. You may decline the funds if you don't want the loan.
Is there a deadline for requesting a Stafford Loan? You must submit a Stafford Loan request before the end of the academic year for which the loan is being borrowed.
To have your loan funds credited to your account before the school's billing deadline, you should begin the process before the start of the academic year, but after you receive your financial aid award letter.
After I request a Stafford Loan, how do I receive the loan funds? As with other types of financial aid (e.g., scholarships and grants), loan proceeds are sent to your school. The school first credits your account to pay for tuition, fees, room and board, and other applicable charges. If money remains, the school may release it to you.
Does my federal loan eligibility depend on my academic performance? Your eligibility to receive federal student loans depends on your progress toward completing your program of study. This is called satisfactory academic progress or SAP.
If you withdraw from school, you may owe a refund of any federal financial aid you received before withdrawing. Be sure you understand your school's SAP and refund policies; they are generally detailed in the student handbook.
Are there tax benefits to taking out student loans? You may be eligible for credits and deductions on your federal taxes for student loan interest paid throughout the year, including voluntary interest payments made while you're in school. Find out more in IRS Publication 970, Tax Benefits for Education.
What if I need more financial aid? Graduate students often need to borrow more than the amount allowed through the Stafford Loan program.
To bridge the gap between a school's cost of attendance and funds available to the student from gift aid, Stafford loans and savings and income, graduate students often apply for Federal GradPLUS Loans. With low interest rates and tax-deductible interest, PLUS Loans for graduate students or private student loans, such as Signature Student Loan, are prudent choices to help graduate students pay for school.
What else do I need to know? Student loans are a legal obligation that must be repaid even if you:
- don't finish your academic program
- are not satisfied with your education
- don't find a job after leaving school
- don't receive a billing notice from your lender
Borrowing student loans is an important investment in your future. Protect your investment by finishing school and getting the best education experience possible.
