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The government awards three types of financial aid for higher education: grants, loans, and work-study. In the loan category there are four major programs backed by Uncle Sam: The Stafford Loan Program, PLUS Loan Program, Consolidation Loan Program, and the Perkins Loan Program. The following are details about the Stafford Loan Program: Details: There are two types of Stafford Loans: Direct Stafford Loans and FFEL Stafford Loans. Direct Stafford Loans are available through the William D. Ford Federal Direct Loan Program, with the U.S. government as the lender. FFEL Stafford Loans are available through the Federal Family Education Loan Program with participating banks, credit unions, or other lenders as the lenders. For FFEL Stafford Loans, you will locate a lender by contacting your school or the Federal Student Aid Information Center (1-800-4-FED-AID). Eligibility: You must be enrolled at least half time. Based on: Subsidized loans are based on financial need. The government subsidizes the interest payments so that you are not charged interest before you begin repayment or in approved periods of deferment. Unsubsidized loans are not based on financial need. You are charged interest from the time the loan is disbursed until it is paid off. In one school year, you can have a Subsidized Stafford Loan, Unsubsidized Stafford Loan, or both. Amount: For dependent undergraduate students, you can borrow a maximum of $2,625 if you’re a first-year student in a full academic year program, $3,500 if you have completed your first year of study and are enrolled in a full academic year program, or $5,500 a year if you’ve completed two years of study and are enrolled in a full academic year program. For independent undergraduate students or dependent students whose parents are not able to get a PLUS loan, you can borrow a maximum of $6,625 if you’re a first-year student in a full academic year program ($2,625 of this amount can be subsidized), $7,500 if you’ve completed your first year of study and are enrolled in a full academic year program ($3,500 of this amount can be subsidized), or $10,500 a year if you’ve completed two years of study and are enrolled in a full academic year program ($5,500 of this amount can be subsidized). For graduate students, you can borrow a maximum of $18,500 each year ($8,500 of this amount can be subsidized). Cost: The interest rate varies from year to year but will never exceed 8.25 percent. There is also a fee of up to four percent of the loan. To apply: Complete the Free Application for Federal Student Aid (FAFSA). How you get the money: The money will be disbursed to your school either by the Department of Education for Direct Stafford Loans or by the lender for FFEL Stafford Loans. The money must first be used for tuition, fees, and room and board. After these expenses are paid, you will receive the remaining amount in a check. How you repay the money: You will begin to repay your loan after you graduate, leave school, or drop below half-time enrollment. For Direct Stafford Loans, you can pay using one of four methods: the Standard Repayment Plan of a fixed amount per month for up to 10 years; the Extended Repayment Plan, which extends the repayment period to generally between 12 and 30 years; the Graduated Repayment Plan, in which your payments start lower and increase generally every two years; or the Income Contingent Plan, in which your income affects the amount of your monthly payments. For FFEL Stafford Loans, you can pay using one of three methods: Standard Repayment Plan, Graduated Repayment Plan, or the Income-Sensitive Repayment Plan, in which your income affects the amount of your monthly payments. All loans must be repaid within 10 years. Under certain circumstances, you can receive a deferment to temporarily postpone payments on your loan. For subsidized loans, you do not pay interest during the deferment period. For unsubsidized loans, you do. Under certain circumstances you can receive forbearance, a limited and temporary postponement or reduction of your payments if you are unable to meet your repayment schedule and are not eligible for a deferment. These circumstances may include poor health, serving in a medical or dental internship or residency, or if the payments exceed 20 percent of your monthly gross income. For both subsidized and unsubsidized loans, you pay interest during the forbearance period. Deferments and forbearance must be approved by the Direct Loan Servicing Center (1-800-557-7392) if you have a Direct Stafford Loan or with the lender if you have an FFEL Stafford Loan.
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