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Stafford Loans Explained

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Stafford loans are a type of federally-guaranteed student loan made through the Direct Loan Program to both undergraduate and graduate students.

Types Of Stafford Loans

Stafford loans are either subsidized or unsubsidized. In subsidized Stafford loans, you aren’t going to be charged any interest on your student loan before your repayment period begins as well as during any authorized periods of deferment. In other words, the government is subsidizing the interest.

With unsubsidized Stafford loans, interest on your loan continues to accrue while you’re not in repayment. This is useful to remember if you’re going to use a lot of deferment or forbearance time because interest on the student loan will add up quickly.

Subsidized Stafford loans are given out based on need, but unsubsidized loans are given out without regard to financial need. You can receive a subsidized and an unsubsidized student loan for the same enrollment period.

How To Apply For A Stafford Loan

Applying for a Stafford loan is fairly simple. First, you need to be certain that you’ve been accepted into your college or university. Once that’s done, you’re going to need to complete the Free Application for Federal Student Aid (FAFSA). You’ll get an award letter from your school, which will detail your eligibility for Stafford loans (subsidized as well as unsubsidized). Apply for your loan based on the award letter, and you’re all set.

Limits Of Stafford Loans

Dependent undergraduate students can take out a maximum amount of up to $5500 in Stafford student loan money in the first year of study, of which no more than $3500 may be in subsidized loans.

For your second year of student, you can take out a maximum Stafford loan of $6500, of which no more than $4500 may be in subsidized student loan money.

For your third year and beyond, you can get a maximum of $7500 in Stafford student loan funds, of which no more than $5500 may be subsidized.

The maximum total debt for dependent undergraduate borrowers is $31,000, with no more than $23,000 in subsidized loans.

Independent and dependent undergraduate students whose parents are unable to obtain PLUS loans can get up to $9500 in the first year in Stafford loans, $10,500 in the second year, and up to $12,500 in the third year and beyond.

Repayment Options For Stafford Loans

Stafford loans can be repaid under the usual 10-year repayment period, but if you’re having problems making your payments then you may be able to look into the following:

  • consolidation
  • forbearance
  • deferment
  • forgiveness
  • income-based repayment
  • income-contingent repayment

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