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| Federal Stafford Loan | The Federal Stafford Loan is the most widely used loan in the student education loan program. Federal guidelines limit the maximum interest rate to no more than 8.25% and outline repayment terms of up to 10 years.
Subsidized
The Federal Subsidized Stafford Loan is a low-interest loan made to students who demonstrate financial need. Undergraduates may borrow up to $2,625 for the first year, $3,500 for the second year and $5,500 for each remaining undergraduate year. Undergraduate students may borrow an aggregate limit of $23,000. Independent students may have additional eligibility under the Unsubsidized Stafford Loan.
Graduate and Professional students may borrow up to $18,500 a year for a total of $138,500 (this includes undergraduate Subsidized and Unsubsidized Stafford Loans). The interest rate is variable and capped at 8.25%. While the borrower is enrolled in school at least half-time, the interest is paid by the federal government. Repayment begins six months after the student graduates, withdraws from school or drops below half-time status. Repayment may take as long as 25 years based on the total outstanding balance.
Unsubsidized
The interest rate and amounts for this loan are the same as for the Subsidized Stafford Loan. However, students are responsible for paying the interest while enrolled in school and during any grace period or deferment. This loan is not based on financial need. A student may opt to have the interest deferred and accrued or choose to pay the interest payments while enrolled. Students may borrow a combination of Subsidized and Unsubsidized Loans but may not exceed the annual or maximum loan limits stated previously. An independent undergraduate's aggregate limit including Unsubsidized Stafford Loans would increase to $46,000. Repayment terms are the same as for the Federal Subsidized Stafford Loan.
Eligibility:
· U.S. citizen or permanent resident.
· Full- or half-time undergraduate or graduate student.
· Non-need based.
· No credit check required.
Interest rate:
Annual limits are variable and may change on July 1. For loans disbursed on or after July 1, 1998, rates are set:
· During in-school, grace or deferment, rate based on 91 day T-bill rate + 1.70%.
· During repayment periods, based on 91 day T-bill + 2.30%.
· Capped at 8.25%.
· Based upon current rates.
Interest capitalization:
Unpaid interest will be capitalized at the start of repayment and at the end of any deferment. If borrowers obtain forbearances, interest may be capitalized no more frequently than quarterly, and again at the end of the forbearance period.
Total origination or insurance fees:
4% (3% to the federal government and 1% to the state or regional guaranty agency, to cover administrative costs).
Repayment term:
Up to 10 years.
Minimum payment:
$600 per year ($50 per month per FFELP loan account). Borrowers who take out Stafford loans from more than one lender may be required to make more than one minimum payment.
Interest subsidy:
Not applicable.
Repayment begins:
Following a 6-month grace period after leaving school.
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