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Federal Stafford Loans

A Stafford Loan is a Student Loan which is offered to students enrolled in American educational institutions for higher education to finance their education. The Congress renamed the federal guaranteed Student Loan program to Federal Stafford Loan in 1988. These loans are provided to the students at lower interest rates than other private loans as they are guaranteed by the full faith of the U.S Government. But there are some strict eligibility requirements and limits on borrowing on Federal Stafford Loans.

The Federal Student loan is a building block and very useful to student’s financial aid packages. The students borrowing from Federal Stafford Loans can borrow the required amount of money regardless of their financial need for both the undergraduate and graduate programs. The interest rates on these loans depend whether it is subsidized or unsubsidized.There are also various kinds of federal student loans like the Stafford plus loan.

Benefits of Federal Stafford Loans

  • No payment required while enrolled in school.
  • Low fixed interest rate of 6.80% (for the year 2011 – 2012).
  • High borrowing Limits up to $20,000 depending on the degree status and number of years in school/college.
  • Acceptance is not based on credit.
  • Excellent repayment options with good assistance.

Eligibility for Federal Stafford Loans

To be eligible for federal Stafford Loans you must satisfy the following conditions.

  • You must be a U.S. permanent citizen or national or an eligible non-citizen who is accepted for attending a school participating in Federal Student Loan program.
  • You must have enrolled in the school or plan to enroll for at least half-time.
  • For subsidized federal Stafford loans you must have the financial need as stated by the school.
  • To be eligible for Stafford loan you must have submitted a FAFSA.

Limits on Federal Stafford Loans

Dependent Students Annual Loan Limits
For First Year $5,500 ($3,500 subsidized and $2,000 unsubsidized)
For Second Year $6,500 ($4,500 subsidized and $2,000 unsubsidized)
For Third Year and Beyond $7,500 ($5,500 subsidized and $2,000 unsubsidized)
Independent Students Annual Loan Limits
For First Year $9,500 ($3,500 subsidized and $6,000 unsubsidized)
For Second Year $10,500 ($4,500 subsidized and $6,000 unsubsidized)
For Third Year and Beyond $12,500 ($5,500 subsidized and $7,000 unsubsidized)
For Graduate or Professional $20,500 ($8,500 subsidized and $12,000 unsubsidized)
Lifetime Limits
For Undergraduate Dependent $31,000 (Up to $23,000 can be subsidized
For Undergraduate Independent $57,500
For Graduate or Professional $138,500 (Up to $65,000 can be subsidized)
or $224,000 (for the Health Professionals)
For loans which are disbursed on or after July 1, 2008.

Interest Rates on Federal Student Loans

Academic Year Subsidized Rates Graduate/Unsubsidized Rates
2010 – 2011 4.50% 6.80%
2011 – 2012 3.40% 6.80%
2012 – 2013 6.80% 6.80%

Federal Stafford Loans – FAFSA Dependency status

The FAFSA form tells the conditions for which a student is considered to an independent student. Thus if you do qualify for an independent student status it means your parent’s financial are not included on the FAFSA. It is unlikely that you are an independent student unless you are a graduate student or have children of your own. The FAFSA dependency questions can determine your dependency status.

Repayment of Federal Stafford Loans

After you have received the first direct Loan you will be contacted by the loan servicer whom you have to repay the loan. He/she will provide regular updates on the status of Stafford loan repayment. The Stafford Loan repayment starts after you graduate or leave below the half time enrollment but you have a six month grace period before you begin the repayment. The Stafford loan program offers many repayment programs to meet different needs of the borrowers/students. Generally a person has about 10 to 25 years to repay the loan according to his/her repayment plan. But a longer period of repayment also comes with larger repayment value and the student ends paying larger total interest value. You can also receive more information on your loan repayment from your school or from your loan servicer.

Federal Stafford Loan Forgiveness

A federal Student Loan forgiveness may be granted under few circumstances. You may qualify for loan forgiveness of all or some of your loan amount for some cases like these. Federal Student Loan Forgiveness has some factors and easy methods of approval which you can get from the linked article .If you teach full time for about 5 years at an educational institute/service serving families with low-income or meet other requirements. If you have made 120 payments on a Direct Loan while being employed in public service jobs where some conditions apply.

Applying for the Federal Stafford Loan

To apply for a subsidized or unsubsidized Federal Stafford Loan you must fill out a FAFSA form. Once you have completed the process the Free Application for federal student aid form (FAFSA) is sent to your school. The school will then inform you of the loan availability and the loan options together with repayment terms/options. Then you have to accept the loan and are required to sign a master promissory note before the funds which are then disbursed in your favor.

The Federal Stafford Loans is quite a help to students for their financial needs for higher education for a successful life and a bright future with low interest rate. Thus you should apply for such a good loan scheme by the federal government with excellent repayment options if it suits you for your education. As alternatives you can also look at the other types of student loans (federal and private) available to students as financial aid and google for further information.

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