Stafford Loan Basics

A Federal Stafford Loan is a long-term, low-interest loan that is awarded by the Office of Financial Aid. The loan in typically funded by participating banks, savings and loan associations, and credit unions. These loans are also guaranteed by state and governmental agencies. These loans are never guaranteed, so it will not be based on your income or credit history. Your repayment time begins six months after you have graduated and the repayment has to be met within 10 years after graduating college. This loan is available to everyone and the amount you would receive is based solely on your financial need and academic level.

Two types of Stafford loans

Subsidized loans are awarded on the financial status. They are interest free while you are enrolled during periods and at least half-time of the authorized deferments. During these periods the Federal Government subsidizes the interest. Once you enter the repayment process you will then be charged interest.

Unsubsidized loans, are not based on financial need, however they do take into consideration your cost of attendance and any other aid you will receive. In unsubsidized loans you are charged interest from the time the loan is disbursed until it is paid in full. Though you can choose to defer the interest during enrollment and the deferment periods, the loan will then be capitalized.

Loan Fees and interests rate

Generally, the interest rate is a fixed rate of 6.8% and the loan fees include 2%, and then they can go either lower or higher in the years that follow.

Loan amounts

The loan amount will depend on where the student is in school, such as freshman students who have 0-23 credits can receive anywhere in between $2,625 to $3,500 annually. Sophomore students who have 24-53 credits will receive anywhere from $3,500 to $4,500 annually. Junior college students who have earned 54-83 credits can obtain $5,500 annually. Also, seniors who have earned 84+ credits will receive the same amount as juniors. However if you receive financial aid, you could possibly receive less than these amounts.