Stafford Loans and Interest Rates
A Stafford Loan is a federally backed, variable student loan interest rate that covers all or part of your undergraduate and graduate education. Stafford rates are currently set at 6.8%.
Stafford loans are available to students who meet the following eligibility requirements:
• Enrollment at least half-time as determined by the school
• US Citizenship or eligible residential status
• Satisfactory academic progress as determined by the school
• Not in default on any federal education loans
There are two types of Stafford Loans available. A subsidized or unsubsidized loan.
Subsidized Loans are need-based. The federal government pays the interest on the student loan interest rate while the student is in school, during the six-month grace period before repayment begins, and during periods of approved deferment. The federal government determines your eligibility for a subsidized loan based on the information you provide on your Free Application for Federal Student Aid (FAFSA) - Located at http://fafsa.ed.gov
Unsubsidized Loans are available to all eligible students regardless of need. Students pay all of the interest that accrues during school and during approved deferments.
Interest Rates and Fees for the Stafford Loan have variable student loan interest rates that are adjusted by the Federal Government every July 1. The current rate for Stafford Loans in grace is 6.54% and 7.14% for active repayment. By federal mandate, rates for Stafford will never exceed 8.25%.
Loan Fees for a Stafford Loan do require a total of 4% administrative and guarantee fees upon origination. These fees are standard and set by industry standards as part of this federally sponsored program.
The 3% origination fee of the principal is deducted each time a disbursement is made. For instance, if the school certifies $20,000 for a school year, an additional $600 is added. If there are two disbursements during the school year, $300 is taken out during each disbursement. This fee is distributed to the Federal Government to offset student loan program costs.
The 1% guaranty fee is due to the guarantor as insurance against default.
Section 221 of the Internal Revenue Code allows some student loan borrowers to deduct a portion of their student loan interest rate costs for a given year. As of 2001, you could be eligible to deduct up to $2,500 in interest. However, this may be contingent based on the loan’s disbursement date and your income. A certified tax adviser would have more specific information for your individual situation.
Annual Borrowing Limits for subsidized & unsubsidized are as follows:
• Year 1 $2,625
• Year 2 $3,500
• Year 3/4 $5,500 (per year)
• Graduate Years $8,500 (per year)
Independent undergraduate students and graduate students may opt for additional unsubsidized funds:
• Year 1/2 $4,000 (per year)
• Year 3/4 $5,000 (per year)
• Graduate Years $10,000 (per year)
Students are not allowed to accrue more than the following amount of Stafford Loan debt:
• $23,000 as a dependent undergraduate student
• $46,000 as an independent undergraduate student
• $138,000 as a graduate or professional student (including Stafford Loans received for undergraduate work)