How to Get Stafford Loans?
Stafford loans are part of a federal program designed to help students in financial need pay for their college education. As the price of college tuition rises, more and more people are finding it increasingly difficult to pay for a higher education. Federal Stafford Loans help financially needy students pay for college by offering them loans with lower interest rates and a federal guarantee.
What is a Stafford Loan
A Stafford loan is funding offered to students attending any certified institute of higher education in the U.S.. Under Title IV of the Higher Education Act of 1965, students can receive federally guaranteed loans at a lower interest rate than may otherwise be available through private lending agencies. Stafford Loans are named in honor of the late Senator Robert Stafford of Vermont in recognition of his work on higher education in the United States.
The Stafford loan program allows undergraduate students to borrow up to 3,500 dollars during their freshman year, 4,500 dollars during their sophomore year, and up to 5,500 dollars for each additional year of college. The undergraduate cap is a 23,000 dollars cumulative benefit.
Qualifying postgraduate students are eligible to borrow up to 20,500 dollars per year with a cumulative maximum of 65,500 dollars for both undergraduate and postgraduate education.
Types of Stafford Loans
Federal Stafford loans include:
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Subsidized: In a subsidized loan, any interest accrued while the student is attending school is paid by the federal government. The majority of subsidized loans are offered to students with a family Adjusted Gross Income (AGI) of less that 50,000 dollars. While about 25 percent of subsidized loans are offered to students with AGI of 50,000 to 100,000 dollars, less than 10 percent of these loans are offered to students with an AGI higher than 100,000 dollars.
- Unsubsidized: With an unsubsidized loan, interest payments are capitalized (added to the principle) until the student has graduated or dropped out of school.
Advantages of Stafford Loans
Some of the advantages of Stafford loans versus loan programs from traditional lenders:
- Loan repayment is deferred as long as the student is attending school either full- or part-time. Similarly, repayment doesn�t start up to six months after the student is out of school.
- Long-term repayment options range from 10 to 30 years.
- Stafford loans may be discharged under specific circumstances, such as death, disability or teaching in a low-income school for a period of five years. Loans may also be discharged as a result of school closure.
- The interest rates on Stafford loans are fixed at 6.8 percent for disbursements beginning after June 1, 2006 and are thereafter capped at 8.25 percent.
- These loans are only available through the federal government, meaning that the terms and conditions are standard.
Keep in mind that borrowers must contact the Federal Direct Student Loan Program directly to determine their eligibility for loan forgiveness (the circumstances in which you aren�t responsible for repaying the loan).
Enrollment Process
Federal Stafford Loans are available through two different programs. The Federal Direct Student Loan Program provides loans through the U.S. Department of Education directly to students or their parents. The Federal Family Education Loan Program offers loans to students through private institutions that are backed by a government guarantee against default. Loans from both of these programs carry the same deferment options and repayment programs.
Every student with hopes of getting a Stafford loan must complete the Free Application for Federal Student Aid (FAFSA). Filling out the FAFSA application is required regardless of income or need. Once the FAFSA is completed and submitted, the Department of Education will process the application and then submit a Student Aid Report to each of the schools the student is considering attending.
Every student with hopes of getting a Stafford loan must complete the Free Application for Federal Student Aid (FAFSA). Filling out the FAFSA application is required regardless of income or need. Once the FAFSA is completed and submitted, the Department of Education will process the application and then submit a Student Aid Report to each of the schools the student is considering attending.
Each school then sends a Financial Aid Award Letter to the student outlining any grants, loans or work study programs for which he is eligible. If the student is eligible for a Stafford loan, he will complete a Master Promissory Note (a legally-binding promise of repayment) to receive disbursements.
In the period between 1958 and 1996, the average annual inflation rate for college tuition was 7.24 percent, outpacing general inflation by 2.75 percent. This gradual increase in the cost of higher education has made it more difficult for students from lower income families to achieve a post high school education. The Federal Stafford Loan Program is an important tool for assisting these students in their dream of earning a college degree.
In the period between 1958 and 1996, the average annual inflation rate for college tuition was 7.24 percent, outpacing general inflation by 2.75 percent. This gradual increase in the cost of higher education has made it more difficult for students from lower income families to achieve a post high school education. The Federal Stafford Loan Program is an important tool for assisting these students in their dream of earning a college degree.