In addition to Perkins Loans, the U.S. Department of Education administers the Federal Family Education Loan (FFEL) Program and the William D. Ford Federal Direct Loan (Direct Loan) Program. Both the FFEL and Direct Loan programs consist of what are generally known as Stafford Loans (for students) and PLUS Loans for parents and graduate and professional degree students; PLUS Loans will be explained later.
Schools generally participate in either the FFEL or Direct Loan program but sometimes participate in both. Under the Direct Loan Program, the funds for your loan come directly from the federal government. Funds for your FFEL will come from a bank, credit union, or other lender that participates in the program. Eligibility rules and loan amounts are identical under both programs, but repayment plans differ somewhat.
Federal Stafford Loans are the backbone of the Department of Education’s self-help aid program for students. The advantage of Stafford Loans is that their interest rate is lower than what students or parents could get through a private lender. However, it’s usually higher than the rate for a Perkins Loan. Stafford Loans are available to students enrolled in an eligible program at least half time and carry variable interest rates that are adjusted each July 1 for the following 12 months.
A Stafford Loan may either be subsidized or unsubsidized. Subsidized loans are based on financial need, and the federal government pays interest on the loans while the student is in school. Students pick up the payments on loan interest and principal six months after they graduate.
Students who do not show financial need, according to the Department of Education’s guidelines, but still need more money for school, may qualify for an unsubsidized Stafford Loan. This type of loan does not offer the interest grace period. The borrower is responsible for interest charges beginning the date the loan is disbursed.
Students may take from 10 to 30 years to pay off their Stafford Loans, depending on the amount they owe and the type of repayment plan they choose. Under certain conditions you can receive a deferment or discharge of the loan.
Stafford Loan Interest Rates:
|
Academic Year |
Subsidized Rates |
Unsubsidized/Graduate Rates |
|
2009 – 2010 |
5.60% |
6.80% |
|
2010 – 2011 |
4.50% |
6.80% |
|
2011 – 2012 |
3.40% |
6.80% |
|
2012 – 2013 |
6.80% |
6.80% |
New interest rate cap for Military Members
Interest rate on a borrower’s loan may be changed to six percent during the borrower’s active duty military service. This applies to both FFEL and Direct loans. Additionally, this law applies to borrowers in military service as of August 14, 2008.
Borrower must contact the creditor (loan holder) in writing to request the interest rate adjustment and provide a copy of the borrower’s military orders.
Stafford Loan Limits:
|
Dependent Students |
Annual Loan Limits |
|
First Year |
$5,500 ($3,500 subsidized / $2,000 unsubsidized) |
|
Second Year |
$6,500 ($4,500 subsidized / $2,000 unsubsidized) |
|
Third Year and Beyond |
$7,500 ($5,500 subsidized / $2,000 unsubsidized) |
|
Independent Students |
Annual Loan Limits |
|
First Year |
$9,500 ($3,500 subsidized / $6,000 unsubsidized) |
|
Second Year |
$10,500 ($4,500 subsidized / $6,000 unsubsidized) |
|
Third Year and Beyond |
$12,500 ($5,500 subsidized / $7,000 unsubsidized) |
|
Graduate or Professional |
$20,500 ($8,500 subsidized / $12,000 unsubsidized) |
|
Lifetime Limits |
|
|
Undergraduate Dependent |
$31,000 (Up to $23,000 may be subsidized) |
|
Undergraduate Independent |
$57,500 |
|
Graduate or Professional |
$138,500 (Up to $65,000 may be subsidized) or $224,000 (for Health Professionals) |
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