Direct and Federal Stafford Loans
Federal Stafford Loans
- Federal Stafford Loans are the U.S. Department of Education's major form of self-help financial aid. The funds for your loan are lent to you by a credit union or bank that participates in the Federal Stafford Loan Program. If you borrow, be sure you have the best benefits possible. See the borrower benefits offered by the Utah Higher Education Assistance Authority, the state's guaranty agency.
Federal Stafford Loans are either subsidized or unsubsidized.
- A subsidized loan is awarded on the basis of financial need. You will not be charged any interest until your repayment period begins, or during authorized periods of deferment. The federal government pays your interest during these periods.
An unsubsidized loan accrues interest from the time the loan is disbursed until it is paid in full. If you allow the interest to accumulate, it will be capitalized; that is, the interest will be added to the principal amount of your loan and additional interest will be based upon the higher amount. This will increase the amount you have to repay. If you choose to pay the interest as it accumulates, you'll repay less in the long run.
You can receive a subsidized loan and an unsubsidized loan for the same enrollment period.
If you're an eligible student enrolled in an eligible program of study at least half time, at an eligible institution, you may receive a Federal Stafford.
How much can I borrow?
If you're a dependent undergraduate student you can borrow:
- $3,500 if you're a first-year student enrolled in a program of study that is at least a full academic year.
- $4,500 if you've completed your first year of study and the remainder of your program is at least a full academic year.
- $5,500 a year if you've completed two years of study and the remainder of your program is at least a full academic year.
- $7,500 if you're a first-year student enrolled in a program of study that is at least a full academic year (only $2,625 of this amount may be in subsidized loans).
- $8,500 if you've completed your first year of study and the remainder of your program is at least a full academic year (only $3,500 of this amount may be in subsidized loans).
- $10,500 a year if you've completed two years of study and the remainder of your program is at least a full academic year (only $5,500 of this amount may be in subsidized loans).
Federal Stafford Loans are not made to students enrolled in programs that are less than one-third of an academic year.
Graduate students:
Generally, if you're a graduate student, you can borrow up to $20,500 each academic year. (Only $8,500 of this amount may be in subsidized Stafford loans.)
Please note that the amounts given above are the maximum yearly amounts you can borrow in both subsidized and unsubsidized loans. You may receive less than these yearly maximum amounts if you receive other financial aid that is used to cover a portion of your cost of attendance.
The total debt you can have outstanding from all Stafford Loans combined:
- $23,000 as a dependent undergraduate student.
- $46,000 as an independent undergraduate student (only $23,000 of this amount may be in subsidized loans).
- $138,500 as a graduate or professional student (only $65,500 of this amount may be in subsidized loans). The graduate debt limit includes any Stafford Loans received for undergraduate study.
What is the interest rate charged on these loans?
If you have a loan that is/was first disbursed on or after July 1, 2006, the interest rate is fixed at 6.8%.
If you have a loan that was first disbursed before July 1, 2006, the interest rate is variable and will change each year of repayment depending on changes to the federal treasury bill interest rate, but it will never exceed 8.25%. The interest rate is adjusted each year on July 1st. You'll be notified of interest rate changes throughout the life of your loan.
If you have subsidized loans, you will not be charged interest while you're enrolled in and attending school at least half time, during a grace period, or during authorized periods of deferment. Interest will begin to accrue — that is, accumulate — when you enter repayment.
If you have unsubsidized loans, you'll be charged interest from the day the loan is disbursed until it is repaid in full, including in-school, grace, and deferment periods. You may choose to pay the interest during these periods, or it can be capitalized.
Is there a charge or fee for these loans?
You may pay fees of up to 4% of the loan. (Utah's student loan guaranty agency, UHEAA, has outstanding borrower benefits to help reduce the cost of a Federal Stafford Loan.) The amount of your fees may vary as many lenders offer rebates and discounts on loan fees. These fees are deducted proportionately from each disbursement of your loan. For a Federal Stafford Loan, a portion of this fee goes to the federal government to help reduce the cost of the loans.
When do I have to pay back these loans?
After you graduate, leave school, or drop below half-time enrollment, you have six months before you begin repayment. This is called a grace period.
During the grace period on a subsidized loan, you don't have to pay any principal, and no interest will be charged. During the grace period on an unsubsidized loan, you don't have to pay any principal, but interest will accrue. You can either pay the interest or allow it to be capitalized.
After you leave school or drop below half-time enrollment, you'll receive information about repayment and will be notified of the date repayment begins. However, you're responsible for beginning repayment on time, even if you don't receive this information.
Is it ever possible to postpone repayment of my loan?
Yes. Under certain circumstances, you can receive a deferment or forbearance on your loan. A deferment allows you to temporarily postpone payments on your loan. If you have a subsidized loan, you will not be charged interest during the deferment. If your loan is unsubsidized, you will be responsible for the interest on the loan during the deferment. You can't receive a deferment if your loan is in default.
If you are temporarily unable to meet your repayment schedule but are not eligible for a deferment, you may receive forbearance for a limited and specified period. During forbearance, your payments are postponed or reduced. Whether your loans are subsidized or unsubsidized, you will be charged interest. If you don't pay the interest as it accrues, it will be capitalized.
For example, you may be granted forbearance if you are...
- unable to pay due to poor health or other unanticipated personal problems.
- serving in a medical or dental internship or residency.
- serving in a position under the National Community Service Trust Act of 1993.
- obligated to make payments on certain federal student loans that are equal to or greater than 20 percent of your monthly gross income.
Is it ever possible to have my student loans cancelled?
In some cases, there are state or federal programs that may provide forgiveness of part of your student loan debt. If you work in certain professions, such as engineering or teaching, and meet all eligibility requirements, you may not have to repay all or part of your loan. Contact your school or lender for more information. UHEAA (www.uheaa.org) is also a great place to get information.
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