Stafford Student Loan - Federal Stafford Loans
A Stafford Student Loan is a federally backed, variable rate student loan that covers all or part of your undergraduate and graduate education. Stafford rates are currently set at 6.8%.
Eligibility Requirements are as follows:
Stafford Student 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 for students:
Subsidized Loans—–These are need-based. The federal government pays the interest on the loan 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).
Unsubsidized Loans——These 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——-Stafford Loans have variable interest rates that are adjusted by the Federal Government every July 1. The current rate for Stafford Student Loans in grace is 6.54% and 7.14% for active repayment. By federal mandate, rates for Stafford Student Loans will never exceed 8.25%.
Loan Fees——Stafford Student Loans 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.
Origination Fee——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.
Guaranty Fee——The 1% guaranty fee is due to the guarantor as insurance against default.
Tax Deduction——Section 221 of the Internal Revenue Code allows some student loan borrowers to deduct a portion of their interest 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. Please consult your tax advisor for more details.
Students are not allowed to accrue more than the following amount of Stafford Student 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 Student Loans received for undergraduate work)
Once a student loan goes into “default” status, the full balance of the loan becomes due immediately. It also means that other options for delaying payment, including student loan deferment and forbearance, can no longer be used.
Eventually, unpaid defaulted student loans can have long-term consequences beyond just the loan directly. For example, your credit report will take a hit. Once the loan has been forwarded for collection, your wages can be garnished and your federal income tax refunds can be withheld. You also lose your eligibility for other types of federal loans.
Consolidating your defaulted loans into a new loan will show that your old defaulted loans have been paid in full. You will sign a new promissory note, and be able to start from scratch! With only one lender to deal with and one monthly bill, you will find it easier than ever to manage your debt. Also, get reinstated with Deferment and Forbearance options.
So, remember your options are many. However, you must keep up on everything to get the best advantages out of it all. It is your future. Go into it the right way.