Student Loan Advice & News
What is a Direct Federal Stafford Loan?
- October 11, 2014
- Posted by: Dave Rathmanner
- Category: Student Loans
A Direct Federal Stafford Loan is a federal student loan offered by the Department of Education to undergraduate and graduate students. Stafford Loans are aimed to provide students with financial aid to help pay for the cost of their education including tuition, books, and even living expenses.
Types of Stafford Loans
There are two main types of Stafford Loans available to undergraduate and graduate students. The first being Subsidized Stafford Loans. Subsidized Stafford Loans are awarded on the basis of financial need, and carry the benefit of subsidized interest. The federal government pays the accrued interest while a student is in school.
Unsubsidized Stafford Loans are not need-based, meaning any student who submits FAFSA is eligible to receive aid. However, because these loans are unsubsidized the student is responsible for paying any interest that is accrued while in school. Students have the option to pay interest while in school. If the student elects to start payment upon graduation the interest will accrue and be added to the principal amount of the Unsubsidized Stafford Loan. To learn more about these differences, you can continue reading here.
Interest Rates on Stafford Loans
For the 2013-2014 school year, the interest rate for undergraduate subsidized and subsidized loans was 3.86 percent. Graduate rates were set at 5.41 percent. For the 2014-2015 academic year, the federal government set the interest rate for these loans at 4.66 percent for undergraduates, and graduate students had to pay a higher interest rate of 6.21 percent. Interest rates dropped the next year down to 3.76 percent on undergraduate loans and 5.31 percent for graduate loans. The dropping rates didn't last. The upcoming academic year for 2017-2018 will see undergraduate rates of 4.45 percent and graduate rates of 6.00 percent. Click here to see a comparison of the current interest rates.
The Stafford Loan borrowing limits vary of a number of factors, including the year in school, student status, and dependency status of the student. Dependent students are allowed to borrow up to a lifetime limit of $31,000 and undergraduate independent students can borrow up to $57,500. Graduate students have a lifetime cap at $138,500 or $224,000 for any healthcare/medical professionals.
To apply for a Stafford Loan, the applicant needs to be a United States citizen, must have a Social Security Number (SSN), a high school diploma or GED, complete and sign the Free Applicant for Federal Student Aid (FAFSA), and must not have defaulted on any other federal financial assistance program.In addition, students must display financial need and be enrolled in an institute at least as a part time student.