Federal Stafford Loans
If you need to borrow to fund your college or graduate school education, your first stop should be the federal Stafford loan.
Stafford loans are guaranteed by the federal government and come in two varieties: subsidized, where the government pays the interest while you are in school, and unsubsidized, where you are responsible for the interest while you are in school (but you can elect to defer payments while in school). If you elect to defer payments on an unsubsidized Stafford loan, the deferred interest will be added to the principal amount of the loan. To be eligible for subsidized Stafford loans you must be able to show financial need. All students are eligible for unsubsidized Stafford loans. Because Stafford loans are guaranteed by the government, there is no credit check to be eligible.
Stafford loans issued after July 1, 2006 carry a fixed 6.8% interest rate. The interest rate on Stafford loans issued prior to July 1, 2006 is variable and is reset every July 1 based on then-prevailing market interest rates.
Currently, undergraduate students can borrow up to $2,625 in Stafford loans their freshman year, up to $3,500 their sophomore year and up to $5,500 in each of their junior and senior years. Starting July 1, 2007, freshmen will be able to borrow up to $3,500 in Stafford loans and sophomores will be eligible for up to $4,500. The limits for juniors and seniors will remain at $5,500. Overall, an undergraduate may borrow up to $23,000 in Stafford loans.
For families of undergraduates that need additional funds beyond Stafford loans, federal Parent Loans for Undergraduate Students (PLUS) are available to parents of undergraduates. Click here to learn more.
Non-medical graduate students can borrow up to $18,500 (starting July 1, 2007, $20,500) per year in Stafford loans, of which up to $8,500 may be subsidized. Medical students can borrow up to $38,500 (starting July 1, 2007, $40,500) a year in Stafford loans (up to $8,500 may be subsidized). Independent non-medical graduate students can borrow up to an aggregate of $138,500 in Stafford loans, while medical students may be eligible to borrow up to a total of $189,125.
Many students combine subsidized and unsubsidized Stafford loans to borrow the maximum allowable each year.
You must start repaying your Stafford loans 6 months after leaving school (or going below half-time enrollment). The standard repayment term is 10 years. Stafford loans are eligible for consolidation under the Federal Student Loan Consolidation Program. Consolidating your Stafford loans will allow you to extend your repayment period up to 30 years, and significantly reduce your monthly payments.
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