Editorial & Advertiser Disclosure Global Banking And Finance Review is an independent publisher which offers News, information, Analysis, Opinion, Press Releases, Reviews, Research reports covering various economies, industries, products, services and companies. The content available on globalbankingandfinance.com is sourced by a mixture of different methods which is not limited to content produced and supplied by various staff writers, journalists, freelancers, individuals, organizations, companies, PR agencies Sponsored Posts etc. The information available on this website is purely for educational and informational purposes only. We cannot guarantee the accuracy or applicability of any of the information provided at globalbankingandfinance.com with respect to your individual or personal circumstances. Please seek professional advice from a qualified professional before making any financial decisions. Globalbankingandfinance.com also links to various third party websites and we cannot guarantee the accuracy or applicability of the information provided by third party websites. Links from various articles on our site to third party websites are a mixture of non-sponsored links and sponsored links. Only a very small fraction of the links which point to external websites are affiliate links. Some of the links which you may click on our website may link to various products and services from our partners who may compensate us if you buy a service or product or fill a form or install an app. This will not incur additional cost to you. A very few articles on our website are sponsored posts or paid advertorials. These are marked as sponsored posts at the bottom of each post. For avoidance of any doubts and to make it easier for you to differentiate sponsored or non-sponsored articles or links, you may consider all articles on our site or all links to external websites as sponsored . Please note that some of the services or products which we talk about carry a high level of risk and may not be suitable for everyone. These may be complex services or products and we request the readers to consider this purely from an educational standpoint. The information provided on this website is general in nature. Global Banking & Finance Review expressly disclaims any liability without any limitation which may arise directly or indirectly from the use of such information.

What is a Stafford loan?

A Stafford loan is a student loan given by the US Federal government for college and university students. It is referred to as the Federal Direct Loan program[i]. It is a financial aid given to deserving students to pursue an undergraduate or post-graduate degree. The loan disbursed would cover tuition fees, board and room charges, book costs and other expenses related to education.

This is a federally guaranteed loan, which means that the loan is secured by the Government of the United States.

Types of Stafford loans

There are two types of Stafford loans – subsidized and unsubsidized.

Subsidized loans are given for the needy. Those who are financially weak and in need of money are given subsidized loans. This loan is given after assessing the need of the student based on financial circumstances. The interest for this loan is subsidized, which means students need not pay any interest. The loan need not be paid during the study. It can be paid after they either graduate or dropout.

A limited number of subsidized loans are available. Other students can avail of unsubsidized loans. These loans, however, require interest to be paid. But the interest need not be paid until the student completed the course of study or dropouts. Many easy repayment options are available.

Loan amount and interest

One of the factors determining the loan amount which can be disbursed is whether the student is independent or dependent on parents. The other factor is the year of study. Based on these factors, Stafford loans are given up to a maximum of:

  • Freshman year: Dependent students can get up to $5,500 and independent students can get up to $9,500.
  • Sophomore: Dependent – $6,500 and independent – $10,500.
  • Junior and later: Dependent – $7,500 and independent – $12,500.
  • Graduate or Professional degree:$20,500 per year irrespective of dependency status.

There is also a lifetime limit, which is $31,000 for independent students, $57,500 for dependent students and $138,500 for graduate students.

The present interest rate[ii] on Stafford loans (July 1st 2018-Jul 1st 2019) is 5.05% for undergraduate and 6.6% graduate students. There is also a 1.5% loan fee to be paid.

FAFSA

Like most other student loan programs, the first step to get a Stafford loan is to apply for FAFSA. Free Application for Federal Student Aid (FAFSA) is an application[iii] which students have to submit to determine their eligibility for student loans or assistance from federal and state governments and colleges. While applying for FAFSA the student has to reveal all details of assets, loans, and sources of income. The details of the college applied also need to be indicated in the application – this can be changed later. Based on an analysis, a report is prepared which is used to decide whether the student is eligible for a subsidized Stafford loan or not.

Disbursement

Once the loan is approved, it is given usually in two installments, at the start of each of the two semesters for the year. The money is directly given to the college/university. The loan is used to pay for education-related expenses like tuition fee, boarding, and other academic fees.

A Stafford loan is a federal government financial assistance given to undergraduate and post-graduate students to meet their educational expenses. These loans can be repaid on completion of the study.

[i] https://www.investopedia.com/terms/s/stafford-loan.asp

[ii] https://studentaid.ed.gov/sa/types/loans/interest-rates

[iii] https://www.investopedia.com/terms/f/federal-application-of-student-aid-fafsa.asp