Federal Stafford Loan Program
The Federal Stafford Loan Program contains two components: the Subsidized Federal Stafford Loan, a need-based loan, and the Unsubsidized Federal Stafford Loan, a non-need-based loan. The terms of the two loans are almost identical, except that the subsidized Federal Stafford Loan does not accrue interest as long as the borrower maintains at least half-time attendance at an eligible institution, or during the six-month grace period after such enrollment ceases. Subsidized Stafford Loans will no longer be available to graduate students for award periods that begin after July 1, 2012.
The maximum amount that may be borrowed under the Federal Stafford Loan Program is $20,500 per academic year. The unsubsidized Federal Stafford Loan accrues interest during in-school, grace, and deferment periods, and that interest may be either capitalized or paid, at the student's option. If capitalized, most lenders will add the accrued interest to the principal loan amount when the loan enters repayment. Since this varies from lender to lender, it is recommended that you contact your lender regarding the way they will handle accrued interest.
The lifetime aggregate Federal Stafford Loan Program limit is $138,500, of which up to $65,500 can be subsidized Federal Stafford Loans. These limits include loans from undergraduate study. The interest rate for Stafford Loans made after July 1, 2006 is a fixed rate of 6.8%. For loans made prior to July 1, 2006, the interest rate is variable, adjusted each year, and will not exceed 8.25%. Repayment commences six months after the student stops being enrolled at least half-time at an eligible institution. In the typical case where the loan period covers two trimesters, half of the loan amount is disbursed at the beginning of each term. Origination and/or guarantee fees of up to 4% will be taken out of each disbursement.
The Federal Stafford Loan Application Process
Students wishing to receive Federal Stafford Loans must submit a FAFSA to establish eligibility for federal student aid. Students must also complete a CWSL Online Aid Application to specify that they wish to receive federal student loans. Once the financial aid office has assembled the student's aid package, and the student has accepted one or more loans, the loan certification will then be electronically transmitted to the Direct Loan Servicer, who will then send a Master Promissory Note to the student for completion if one is not already on file. Promissory notes may also be completed on the StudentLoans.gov website. Upon disbursement, the school will apply your loan proceeds directly to your student account.
First-time Stafford borrowers must complete entrance counseling at StudentLoans.gov prior to receiving funds.
Be sure to read your promissory note carefully, as it is your responsibility to understand the terms of the loans for which you are applying. Retain copies of all loan documents for your records.