Stafford Loans

What are Stafford Loans?

The Federal Stafford Loan is available through the Federal Family Educational Loan Program (FFELP) to help both undergraduate and graduate students pay for their education.

There are two types of Stafford Loans - subsidized and unsubsidized.

The Subsidized Stafford Loan

Eligibility for subsidized loans is based on financial need as determined by federal guidelines. A loan is called "subsidized" because the government pays interest for the student during:

• At least half-time enrollment in school.
• The six-month grace period after the student ceases attendance on at least a half-time basis.

The Unsubsidized Stafford Loan

This type of loan is available to students regardless of income or need. With an unsubsidized loan, you are responsible for all interest that accrues during in school, grace and deferment periods. You may choose to pay the interest portion only while in school, which would keep your loan balance at principal. If you choose to defer such payments, the interest will be capitalized, resulting in an increase in both total debt and the amount of monthly payments.

Advantages of the Stafford Loan

• If the interest rates rises above the current federally mandated cap (8.25%), you do not pay additional interest.
• It carries low origination and guarantee fees (3%). Many other loans have significantly higher fees.
• Repayment of the loan does not begin until you graduate or drop below half-time status.
• In case of economic hardship, payments may be deferred, extended, or reduced.
• The loan is forgiven in case of permanent disability or death.

Loans are usually issued for a single academic year, and both eligibility and amount or redetermined annually throughout your academic career.