Stafford Loan Frequent Questions

Am I eligible for a Stafford Loan?

You must have submitted a FAFSA to be eligible for a Stafford loan.

For subsidized Stafford loans, you must have financial need as determined by your school.

You must be a U.S. citizen or national, a U.S. permanent resident, or eligible non-citizen.

You must be enrolled or plan to enroll at least half time.

You must be accepted for enrollment or attend a school that participates in the Federal Family Education Loan Program.

You must not be in default on any education loan or owe a refund on an education grant.

How do I apply for a Stafford Loan?

You first must complete the FAFSA or Renewal FAFSA (for returning students). After the FAFSA is processed, your school will review the results and inform you of your loan eligibility by sending you an award letter. Once your award letter is received, you should apply for the Stafford Loan, as well as look at other federal student loans or private student loans.

Are there Stafford Loan deadlines?

There is no single set deadline for completing a Stafford Loan application however your school may have specific deadlines for completing the application. You will need to contact your school's financial aid office to obtain deadlines for your specific institution.

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What's the difference between unsubsidized and subsidized loans?

• Subsidized loans are awarded based on financial need. You will not be charged interest before you begin repayment or during periods of deferment. The federal government "subsidizes" (or pays) the interest during these times.
• Unsubsidized loans are not awarded based on financial needs. Any eligible student can take out Unsubsidized Stafford Loans. You will be charged interest from the time the loan is disbursed, to the time the loan is repaid in full.

When do I receive the Stafford Loan funds?

Your lender will disburse your Stafford Loan funds directly to your school in two installments – usually in the fall and winter semesters. Your loan money will be used to pay your tuition and fees. If you have funds left over, your school will credit your account or pay you directly based on your school's policy.

What are the Stafford Loan interest rates?

The interest rates for the 2008-2009 academic year are 6.00% for subsidized loans and 6.80% for unsubsidized loans. Please see this chart with Stafford Loan interest rates through 2013 for more detail.

How much can I borrow under a Stafford Loan?

The amount you can borrow is based on your grade level and your status as a student. Independent students may be eligible to borrow more because they are paying for college without assistance from their family. Please review the current Stafford Loan limits chart for borrowing limits and to determine dependency status.

Based on your award letter, you may not always qualify for the maximum Stafford Loan amount. For additional loan funding, consider private student loans which allow you to borrow up to the total cost of education less other financial aid received.

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What is EFC and how is it calculated?

EFC stands for "Expected Family Contribution" or the amount the federal government determines a family can contribute to the student's education based on the FAFSA. This calculation determines family resources available from a family's income (less allowances for taxes and living expenses) and assets (less allowances for retirement). A percentage of these available amounts are earmarked as EFC. You can calculate an unofficial EFC right on the Internet, by clicking here.

What can I use a Stafford Loan for?

Stafford Loans can be used towards the total cost of education - tuition, room and board, books and other education-related expenses.

Are there specific schools that accept Stafford Loans?

Yes, Stafford Loans can be used at any eligible school which accepts them. Take a look at the Student Loan Network Eligible Schools Directory for information about which schools accept which loans. If you are unsure or think your school participates in the Direct Loan Program, contact your financial aid officer.

Why did I receive less than what I applied for in Stafford Loan funds?

Lenders retain a percentage of the amount you borrow in guarantee fees and/or origination fees. Guarantee fees are used by the lender in creating a reserve to protect the loan program in instances when borrowers default on their loans. Origination fees are a processing fee retained by lenders. Therefore, what you actually receive will be the awarded amount minus the fees.

In some cases a student may not be eligible for the total maximum in Stafford Loan funds but rather a portion based on their FAFSA determination. For example: The Stafford Loan limit maximum for a freshman student is $3,500 but based on their FAFSA determination, a student may only be eligible to borrow $2,000 for that particular academic year.

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Do I have to apply for a Stafford Loan every academic year?

This is a very common question. You have to apply every year because each year, the amount of aid you are eligible for is determined by your FAFSA. Federal student loans do not "renew" automatically.

Can I receive a Stafford Loan if I have poor credit?

The Stafford Loan is not a credit-based loan - it is a need-based loan and your eligibility for it is governed by your FAFSA submission, not your credit report.

Note: If you are currently delinquent or have previously defaulted on any federal student loans, including Stafford Subsidized, Unsubsidized, Perkins or Parent PLUS Loans, you may not be eligible to receive any form of federal financial aid. Contact the U.S. Department of Education for more information on rehabilitating your delinquent or defaulted education loans.

How can I bridge the financial gap between my total cost of education and the amount of financial aid I was awarded?

There are four main options available to students and families:

• Contributions from Savings. A family might consider using savings or investments to meet educational costs. Families with assets that can be liquidated for educational expenses generally have less reliance on financial aid and pay less in fees and interest expenses.
• Contributions from Income. Some families might be able to meet educational expenses by allocating funds from their current budget. This option requires a family to closely analyze their income and expenses and determine an amount that they can pay on an ongoing basis. Adjustments may have to be made to existing household expenses to afford an amount to allocate from income.
• Tuition Payment Plans: If the school participates in a tuition payment plan, a family can pay the remaining tuition balance in monthly installments which can range from a nine to twelve month period of time.
• Alternative (Private) Student Loans. Consider alternative loans as a means to meet educational costs not covered by federal aid. For more information, read our page on alternative student loans.

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Will I pay any fees for the Stafford Loan?

Many guarantors no longer charge a guarantee fee for education loans. But if they do, this fee could be up to 1% of the loan amount. Additionally, your lender may charge an origination fee up to 3% of the loan amount. Guarantee and origination fees, if charged, are deducted from the loan funds before they are sent to the school.

Are there any penalties for early repayment?

There are never early payment penalties for federal student loans. That is another great benefit of the Stafford Loan.

What are the repayment options for a Stafford Loan?

The standard repayment term for this loan is 10 years. You may be able to extend repayment by deferring or consolidating your loans.

You can choose one of the following plans:

• The Standard Repayment Plan requires you to pay a fixed amount each month based on your principle and interest but will be no less than $50 or the interest that has accrued.
• The Graduated Repayment Plan allows you to make lower payments at the beginning of repayment then, over time, your payments begin to increase. Each of your payments must equal the interest accrued on the loan between scheduled payments and initial payments general cover interest only for the first few years.
• The Income-Sensitive Repayment Plan bases your monthly payment on your yearly income and your loan amount. Payments may change as your income rises or falls.
• The Extended Repayment Plan is for borrowers with FFELP loans totaling more than $30,000. This plan offers a choice of fixed or graduated payments over a period of up to 25 years.

To consolidate your loans, please visit our federal student loan consolidation page.

Please note that loan deferment does not fix your interest rates, it merely puts payment on hold. To lock into an interest rate, you must consolidate your loans. It is also important to note that the types of repayment plans listed above are subject to approval by your lender.

What are the Stafford Loan cancellation policies?

Your school must notify you in writing whenever your account is credited with your loan proceeds. This notification must be sent to you no earlier than 30 days before and no later than 30 days after the school credits your account. You may cancel all or a portion of your loan if you inform your school within 14 days after the date that your school sends you this notice or by the first day of the payment period, whichever is later. Your school can tell you the first day of your payment period.

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