Stafford Loan Q&A

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     Stafford Loan Basics                           Stafford Loan Eligibility

     Applying for a Stafford Loan               Stafford Loan Repayment

     Stafford Loan Terms               

Stafford Loan Basics

What are Federal Stafford Loans?
Federal Stafford Loans are education loans sponsored by the Federal government. Two types of Federal Stafford Loans are available to undergraduate and graduate students:

Subsidized: The government will pay the interest on your Federal Subsidized Stafford Loan as long as you are enrolled in school at least half-time or you are in grace or deferment. Your eligibility is determined by the FAFSA and is based on your financial need.

Unsubsidized: You will be responsible to pay the interest that accrues on an Unsubsidized Stafford Loan while enrolled in school. If you are unable to make interest payments while in school, you may choose to defer the interest until you graduate or if you attend school less than half-time. If you are deferring payments, the accrued interest will be added to your loan balance when the loan enters repayment.

What Is the Interest Rate on Federal Stafford Loans?
Stafford Loan interest rates (as set by the Federal government) for the 2009 – 2010 school year are:

Undergraduate Students
Subsidized Stafford Loan interest rate: 5.6% FIXED
Unsubsidized Stafford Loan interest rate: 6.8% FIXED

Graduate Students
Subsidized Stafford Loan interest rate: 6.8% FIXED
Unsubsidized Stafford Loan interest rate: 6.8% FIXED

Undergraduate students who borrowed Subsidized Stafford loans for the 2008-2009 school year have a 6.0% fixed rate. All other Stafford loans borrowed for the 2008-2009 school year have a fixed interest rate of 6.8%. Most Stafford Loans disbursed before July 1, 2006 have variable interest rates based on the 91-day T-bill rate. The current Federal Stafford Loan interest rates for those loans are 3.61% for students still in school or in grace and 4.21% for students in repayment. These rates are for Stafford Loans first disbursed between 7/1/98 and 6/30/06.

How Much Can I Borrow with a Stafford Loan?
The amount you may borrow is determined by several factors:

• Your grade level and year in school (undergraduate or graduate / freshman, sophomore, etc.)
• If you are classified as a dependent or independent student
• Your cost of attendance
• Other financial aid you have been awarded

Note: Your Expected Family Contribution (EFC) does not affect the amount of Stafford loan money you may borrow.

Annual Stafford Loan Limits:

Lifetime Stafford Loan Limits:

Note: Dependent Undergraduate Students whose legal guardians do not qualify for a Parent PLUS Loan may qualify for the same maximum amounts as Independent Students.

• Be enrolled in a graduate or professional degree program
• Be at least 24 years old by December 31 of award year
• Be married
• Have a legal dependent(s) other than a spouse
• Be a veteran of the U.S. Armed Forces or currently in active duty
• Be an orphan (because parents are deceased) or ward of the court, or was a ward or dependent of the court until the age of 18.
• Have documented unusual circumstances and have been determined to be “Independent” by the college’s Financial Aid Administrator.

If you do not meet one or more of the criteria above, you are considered a Dependent Student.


I Did Not Get Any Financial Aid. What Should I Do?

Did you complete the FAFSA?
If you have not completed the FAFSA yet, find out how you can apply at our Completing the FAFSA section.

Have you received your Award Letter?

• If you have completed the FAFSA, you should receive an Award Letter from your school.
• If you have not received your Award Letter, you may want to contact your school’s financial aid office.
• If you have received your Award Letter and it indicates that you are not eligible for any financial aid, then you may want to contact your Financial Aid Office and ask about Unsubsidized Federal Stafford Loans and other options.

Stafford Loan Eligibility

Am I Eligible for Federal Stafford Loans?
To be eligible for Stafford student loans you must:

• Submit the Free Application for Federal Student Aid (FAFSA) and be certified as eligible by your college or university.
• Be enrolled (or accepted for enrollment) in school at least half-time at an eligible institution.
• Maintain “satisfactory academic progress” as determined by your school
• Not be in default on any Federal education loan and/or owe money on a Federal student grant.
• Have a valid Social Security Number
• Be a U.S. citizen or eligible non-citizen

For more information you can visit the Department of Education’s online Student Guide.

If I take a class or two, can I get Stafford student loans?
You must be enrolled in school at least half-time, as determined by the school. If you are unsure about your enrollment status, you should contact your college’s Financial Aid Office. They will be able to tell you if you qualify for a Stafford Loan. 

Applying for a Stafford Loan

How Do I Apply for Federal Stafford Loans?

1. Before you can apply for a Federal Stafford Loan, you must first submit the Free Application for Federal Student Aid (FAFSA).

2. After you submit the FAFSA, the Federal government calculates your Expected Family Contribution (EFC) and sends a confirmation report to you and your school.

3. Once your school’s financial aid office receives your FAFSA report, they will send you an award letter and financial aid package, notifying you of your eligibility for financial aid, including Federal Stafford Loans.

4. Once you receive your award letter, accept the Stafford Loan offer in your school’s financial aid package and complete the Federal Stafford Loan Master Promissory Note (MPN) online. After you sign and submit your MPN, our servicer will contact your college to request certification that you are eligible to receive a Stafford Loan. Once we have this certification, we can complete the loan approval process and send your Stafford Loan money to the school.

What Is a Master Promissory Note (MPN)?
The Master Promissory Note is your loan application and contract. By signing the MPN, you agree to repay the money you borrow.

Some schools only require you to sign one Stafford Loan MPN and will allow you to use that initial MPN to obtain Stafford student loans in subsequent academic years. If you attend a school that supports this process, you can take out additional loans during all the years you attend the school without completing another MPN. However, if you choose a different lender for a new loan, then you must complete a new MPN.

When Do I Get the Loan Money?
Once you apply for your Stafford Loan, your school will tell us when the loan should be disbursed. The loan is not disbursed in a lump sum; instead it is divided into equal disbursements throughout the loan period, usually before each quarter or semester. Generally, a disbursement may not be made prior to 30 days before the beginning of the academic term.

Where Do You Send the Loan Money?
The loan money goes directly to your school. Your school will apply any funds needed to pay tuition and other school bills. Your school will then give any remaining funds to you.

What's the Difference Between FFEL Program and Direct Loan Program?
These are two different programs doing the same thing: originating Federal education loans (Stafford, PLUS and Consolidation Loans.) Both of the programs have the same basic rules; however, there are a few primary differences:

• The identity of the lender of your loan. The lender in the FFEL Program is a private lender (like Student Lending Works); whereas, the exclusive lender for the Direct Loan Program is the Federal Government.
• The loan discounts offered. FFEL Program lenders may offer different discounts than the Direct Loan Program.

Note: If your school participates in the Direct Loan Program, you must borrow your Federal loans from this lender. If your school participates in the FFEL Program you may choose any FFEL Program lender to borrow your Federal student loans – even if that lender is not listed on your school’s “preferred lender list”.

If My School Participates in the Direct Loan Program Can I Still Get the Student Lending Works Loan Discounts?
No. If your school participates in the Direct Loan Program, you must borrow your Federal loans from that lender.

Stafford Loan Repayment

When Do I Have to Start Repaying My Federal Stafford Loans?
You will not be required to make payments on your Stafford Loans until six months after you graduate or are enrolled less than half-time. Keep in mind; if your Stafford Loans are unsubsidized, interest begins accruing from the date your loan is disbursed.

Although you are not required to pay any interest until six months after you graduate or are enrolled less than half-time, if you choose, you may make payments on the loan interest.

How Long Do I Have to Repay My Federal Stafford Loans?
The regular repayment term for Federal loans is not to exceed 10 years with a $50 minimum payment. If you have $30,000 or more in loans, you may request to have your repayment term extended up to 25 years.

If I Go Back to School, Can I Get an In-School Deferment?
Yes, as long as you are enrolled in school at least half time, as determined by the school.

What is the Difference Between Deferment and Forbearance?
A deferment is a way to postpone your loan payments. If you apply for a deferment, your loan principal will be deferred and your subsidized loans will not accrue interest during the deferment period. You must meet specific criteria as set by the Federal government to qualify for a deferment. For deferment criteria visit the Federal Student Aid website.

Forbearance is also a way to postpone your loan payments. If you apply for forbearance, only your loan principal will be deferred. The interest on your loans will still accrue during the forbearance period and can be paid monthly or deferred and added to the loan balance when the forbearance period expires. If you do not qualify for a deferment, you may be able to receive forbearance, which has less specific qualifications. For forbearance criteria visit the Federal Student Aid website.

Stafford Loan Terms

Stafford Loan Limits

Annual Stafford Loan Limits:

Lifetime Stafford Loan Limits:

Note: Dependent Undergraduate Students whose legal guardians do not qualify for a Parent PLUS Loan may qualify for the same maximum amounts as Independent Students.

Stafford Loan Interest Rate
Stafford Loan interest rates (as set by the Federal government) for the 2009 – 2010 school year are:

Undergraduate Students
Subsidized Stafford Loan interest rate: 5.6% FIXED
Unsubsidized Stafford Loan interest rate: 6.8% FIXED

Graduate Students
Subsidized Stafford Loan interest rate: 6.8% FIXED
Unsubsidized Stafford Loan interest rate: 6.8% FIXED

Undergraduate students who borrowed Subsidized Stafford loans for the 2008-2009 school year have a 6.0% fixed rate. All other Stafford loans borrowed for the 2008-2009 school year have a fixed interest rate of 6.8%. Most Stafford Loans disbursed before July 1, 2006 have variable interest rates based on the 91-day T-bill rate. The current Federal Stafford Loan interest rates for those loans are 3.61% for students still in school or in grace and 4.21% for students in repayment. These rates are for Stafford Loans first disbursed between 7/1/98 and 6/30/06.

Stafford Loan Fees
Stafford Loan fees (as set by the Federal government ) for the 2009 – 2010 school year are:

• 1.0% default fee
• 0.5% origination fee

Stafford Loan Repayment

• Standard Repayment: Monthly payments include both principal and interest and are fixed over the life of the loan (a maximum of 10 years). This plan has the highest monthly payment amount, but the lowest total interest cost. Estimate your monthly payments under this plan using the Great Lakes Account Payment Plan Estimator tool.



• Graduated Repayment: This repayment option allows you to have a lower monthly payment for the first few years and then an increased monthly payment thereafter. For example:
  • For the first 2 years monthly payments will be interest-only.
  • For the next 3 years payments will be slightly higher and include interest and some of the principal.
  • For the remaining life of the loan payments will be made on a standard repayment plan.
  Estimate your monthly payments under this plan using the Great Lakes Account Payment Plan Estimator tool.

• Income Sensitive Repayment: Your monthly payment amount is tied to a fixed percentage of your gross monthly income. Your payments must be greater than or equal to the interest that accrues. You must reapply every year (up to 5 years) and payments are adjusted annually to reflect changes in your income.
  
  
• New! Income Based Repayment: This new repayment plan will be available beginning July 1, 2009 for all Stafford loan borrowers. It will cap your monthly payments at 15% of the difference between your adjusted gross income and 150% of the applicable poverty level, taking into consideration your income, family size, and your total amount borrowed. As with the Income Sensitive Repayment plan, your monthly payment amount is adjusted annually based on changes in your income and family size. Unlike the Income Sensitive Repayment plan, there is no minimum monthly payment amount, and therefore, the minimum monthly payment amount can be lower than the monthly interest charges. The maximum repayment term is 25 years. After 25 years, any remaining debt will be forgiven.
  
  
• Extended Repayment: If you have an outstanding balance of principal and interest in FFELP loans totaling more than $30,000, then you may qualify to extend your repayment term up to 25 years. Estimate your monthly payments under this plan using the Great Lakes Account Payment Plan Estimator tool.