How does the Stafford loan work? - Angola Transparency

Stafford Loans: A Comprehensive Guide

Stafford loans, introduced by the Federal Family Education Loan Program (FFELP), are a type of federal student loan issued to help students finance their higher education. These loans are either subsidized, meaning the government pays the interest while you’re in school, or unsubsidized, meaning you pay all the interest.

Eligibility

To qualify for a Stafford loan, you must meet the following criteria:

Key Facts

Eligibility: To be eligible for a Stafford loan, you must be a U.S. citizen, national, or eligible non-citizen, enrolled at least half-time in an eligible degree or certificate-granting program, and have received a high school diploma or equivalent.
Subsidized vs. Unsubsidized: Stafford loans can be either subsidized or unsubsidized. Subsidized loans are based on financial need, and the government pays the interest while you are in school. Unsubsidized loans are not based on financial need, and you are responsible for paying the interest.
Borrowing Limits: The amount you can borrow with a Stafford loan depends on your grade level and whether the loan is subsidized or unsubsidized. Subsidized loans have lower borrowing limits, while unsubsidized loans have higher borrowing limits.
Repayment: Repayment on Stafford loans typically begins six months after you graduate, withdraw, or drop below half-time enrollment. There are various repayment options available, including income-based repayment and graduated repayment plans.
Interest Rates: The interest rates on Stafford loans are fixed and reset annually. For loans disbursed between July 1, 2023, and July 1, 2024, the interest rate for undergraduate subsidized and unsubsidized loans is 5.50%, while graduate loans have a 7.05% interest rate.

Be a U.S. citizen, national, or eligible non-citizen
Be enrolled at least half-time in an eligible degree or certificate-granting program
Have received a high school diploma or equivalent
Not be in default on any existing federal student loans
Meet general eligibility requirements for federal student aid

Subsidized vs. Unsubsidized Loans

Stafford loans can be either subsidized or unsubsidized.

Subsidized loansThese loans are awarded to students who demonstrate financial need. The government pays the interest while you’re in school, during deferment periods, and during the six-month grace period after you graduate or leave school.
Unsubsidized loansThese loans are not based on financial need. You are responsible for paying all the interest that accrues from the time you receive the loan until it is repaid.

Borrowing Limits

The amount you can borrow with a Stafford loan depends on your grade level and whether the loan is subsidized or unsubsidized.

Subsidized loans

First-year students: Up to $3,500
Second-year students: Up to $4,500
Third-year and beyond: Up to $5,500
Lifetime maximum: $23,000

Unsubsidized loans

First-year students: Up to $5,500
Second-year students: Up to $6,500
Third-year and beyond: Up to $7,500
Lifetime maximum: $31,000

Repayment

Repayment on Stafford loans typically begins six months after you graduate, withdraw, or drop below half-time enrollment. You can choose from several repayment plans, including:

Standard Repayment PlanRepay the loan in equal monthly installments over a 10-year period.
Graduated Repayment PlanRepay the loan in increasing monthly installments over a 10-year period.
Income-Based Repayment PlanRepay the loan based on a percentage of your income. The remaining balance is forgiven after 20 or 25 years of repayment.
Income-Contingent Repayment PlanRepay the loan based on a percentage of your income. The remaining balance is forgiven after 25 years of repayment.

Interest Rates

The interest rates on Stafford loans are fixed and reset annually. For loans disbursed between July 1, 2023, and July 1, 2024, the interest rate for undergraduate subsidized and unsubsidized loans is 5.50%, while graduate loans have a 7.05% interest rate.

Sources

FAQs

What is a Stafford loan?

Stafford loans are a type of federal student loan issued to help students finance their higher education. They can be either subsidized, meaning the government pays the interest while you’re in school, or unsubsidized, meaning you pay all the interest.

Who is eligible for a Stafford loan?

To be eligible for a Stafford loan, you must be a U.S. citizen, national, or eligible non-citizen, enrolled at least half-time in an eligible degree or certificate-granting program, and have received a high school diploma or equivalent.

What are the borrowing limits for Stafford loans?

The amount you can borrow with a Stafford loan depends on your grade level and whether the loan is subsidized or unsubsidized. Subsidized loans have lower borrowing limits, while unsubsidized loans have higher borrowing limits.

When do I have to start repaying my Stafford loan?

Repayment on Stafford loans typically begins six months after you graduate, withdraw, or drop below half-time enrollment.

What are the different repayment plans for Stafford loans?

There are several repayment plans available for Stafford loans, including the Standard Repayment Plan, Graduated Repayment Plan, Income-Based Repayment Plan, and Income-Contingent Repayment Plan.

What are the interest rates on Stafford loans?

Can I consolidate my Stafford loans?

Yes, you can consolidate your Stafford loans into a single loan with a single interest rate. This can simplify your repayment process and potentially lower your monthly payments.

What happens if I default on my Stafford loan?

If you default on your Stafford loan, you may be subject to wage garnishment, tax refund offset, and other collection actions. Defaulting on your loan can also damage your credit score and make it difficult to qualify for future loans.