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Stafford Loans Available to All Students

Francine L. Huff
LoanBiz Columnist

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The most popular federal student loan is the Stafford Loan. These loans have low interest rates and do not require credit checks or collateral. Here is what students need to know about qualifying for a Stafford Loan.

Two Varieties of Stafford Loans

Federal Stafford Loans are guaranteed against default by the federal government and disbursed through the following programs:

  • Federal Family Education Program (FFEL), which is funded by private lenders, such as banks and credit unions.
  • William D. Ford Federal Direct Student Loan Program, which is funded by the federal government and administered by the school.

Subsidized vs. Unsubsidized

Students who have demonstrated financial need can qualify for a subsidized Stafford Loan. According to FinAid, approximately two-thirds of subsidized Stafford Loans go to students whose families have adjusted gross incomes under $50,000. With a subsidized Stafford Loan, the government pays all interest on the loan as long as the student is in school at least half time and during the grace period.

Students with unsubsidized Stafford Loans must pay interest that accrues, although they can defer interest payments until after they complete their education. Deferred interest, however, is added to the principal.

Student Loan Application

All students are eligible to apply for Stafford Loans regardless of their family income. Qualifications include:

  • Filing the Free Application for Federal Student Aid (FAFSA)
  • U.S. citizenship or permanent resident or eligible non-citizen status
  • Not in default on any student loans
  • Enrolling in school at least half time

Stafford Student Loan Limits

Dependent undergraduates can borrow $3,500 as freshmen, $4,500 as sophomores, and $5,500 as juniors and seniors through the Stafford Loan program. Independent undergraduates can borrow a maximum of $7,500 per year as freshmen, $8,500 as sophomores, and $10,500 as juniors and seniors. Graduate students can borrow up to $20,500 per year, although only $8,500 of the annual total can be in subsidized loans.

Receiving Funds

Once the Stafford Loan has been approved, funds are sent to the school in a minimum of two payments that generally correspond to the school's academic terms (for example, fall and winter/spring terms). Funding is paid directly to the school and is deposited directly to the student's account to pay tuition and fees, room and board, and other schools charges. Remaining funds are paid directly to the student.

Student loans help pay for an education that might be otherwise unaffordable. Students should always investigate all sources of funding, including scholarships and grants as well as private student loan programs.

Sources
FinAid
StaffordLoan.com
U.S. Department of Education, Student Aid on the Web


About the Author
Francine L. Huff is a freelance journalist and the author of The 25-Day Money Makeover for Women. She has appeared on a variety of TV and radio shows.

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