Two Stafford loans versions

A financial aid award letter will often include the Stafford loans. There are two versions to the Stafford loans. These are the Federal Family Education Loan Program or FFELP and William D. Ford Direct Loans.

Difference between Stafford loans

The difference between these two is that Stafford FFELP loans and are often borrowed from a bank while being guaranteed by the state you live in or by a guarantee agency designated by the state. On the other hand, the direct loans are borrowed and guaranteed directly from the federal government. The college you are attending will give you a list of the programs they participate in even if they are similar.

Stafford loans amounts

The Stafford loans have a set amount for individuals to borrow. Freshman in college are allowed to borrow $2,625, Sophomores can borrow $3,500, Juniors and Seniors can both borrow $5,500 and Graduate students can borrow up to $18,500. However, these loans do not allow you to borrow any more than the cost of your attendance and any other financial aid is deducted from your loan amount.

Stafford loans interest

The Stafford loan also has a cap on their interest rate of 8.25%. Annually the interest rate is changed and it is calculated by the bond equivalent rate based on the latest Treasury Bill in May.

Stafford loans repayment

Six months after you stop attending college on at least a half time basis then your repayment period begins. The grace period is the period before the six months. Subsidized, unsubsidized or a combination of both can be found with Stafford loans. While attending college on at least a part time basis then students pay no interest. The interest is paid for the student by the government when they are in school and during the grace period. Once you begin to repay you will be given the option of letting the interest accrue or pay it off on a quarterly basis. The interest will be compounded over time and added to your principal if you choose to let the interest accrue over time.