Undergraduates who are looking for a great financial package often turn to the Stafford Loan for their solutions. There are good reasons for this: the loan is very flexible, offering both subsidized and unsubsidized packages, as well as the ability to consolidate student loans once the student has left school. This loan is easier to obtain because it’s guaranteed by the government, and lenders have the option of offering loans for below the standard rates.

Although the interest rate was once determined using the Treasury Bill index, it is now a fixed rate as of July 1, 2006. This rate is currently 6.8 percent, although there are ways lenders can lower that rate depending on how much of a cut they want to take of their margin. Generally, a fee of 4% is deducted from the loan disbursement, with part of this going to the government in the case of loans provided by private lenders (FFEL program). Part of it also goes to the agency that runs the FFEL program in the student’s state.

When Do I Pay Back the Loan?

You will have what is known as a grace period after you graduate or leave school, which will be six months long. During this time you will not have to repay your loan (nor will you be charged any interest on the unsubsidized loan), but you will receive information about the loan repayment and the due date of your first repayment. If you don’t get any information, you will need to check to see when this date will be–you will be held responsible even if you don’t get the information. Your payments will usually be payable monthly, and you should plan to keep them current.

If you have problems meeting your repayment requirements, you can get a forbearance or deferment depending on your circumstances. No payments will be required during this time, and interest is not charged on Direct Stafford Loans or the FFEL, but if you have an unsubsidized loan you will be charged interest during the deferment period. If your circumstances don’t permit the deferment, you may get a forbearance through your lender, but for a short and limited time.

How Much Can I Borrow?

Your Stafford Loan will have an annual limit, and is based on your particular circumstances. Here are the different loan categories and how they will affect your borrowing limits.

Dependent Undergraduates
-Up to $3,500 for the first year students. You must be enrolled in at least a full academic year program.
-Up to $4,500 for students who have completed a year of study, and are enrolled in a program that will be at least another academic year in length.
-$5,500 for those who have finished at least two years of study and the rest of the program is at least a year long.

Independent Undergraduates
-$7,500 for first year students enrolled in a program at least one year academic year long.
-$3,500 may be in loans that are subsidized.
-$8,500 for those who have finished a year of study and the program is at least another academic year long. $4,500 may be in subsidized loans.
-$10,500 for students who have completed two academic years. The rest of the program must be at least one academic year in length, and the limit for subsidized loans is $5,500.