Stafford Loans
Federal Stafford loans are government loans with low interest rates. The government offers both subsidized student loans and unsubsidized student loans. A bank, credit union or other participating private institution acts as the lender.
Am I eligible?
Stafford loans are for undergraduate, graduate and professional degree students. You must be enrolled at least half time in an eligible school program to qualify.
How much can I borrow?
The maximum amount of money you can borrow for a Stafford loan depends on how many years you've been in school and whether you are a dependent or independent student. Amount limits rise with each year. The following maximum annual loan limits are from the 2007-08 Guide to Federal Student Aid, provided by the U.S. Department of Education.
Dependent undergraduate loan limits:
- First year: $3,500
- Second year: $4,500
- Third year and beyond: $5,500
Independent undergraduate student:
- First year: $7,500 (no more than $3,500 of this amount may be in subsidized loans)
- Second year: $8,500 (no more than $4,500 of this amount may be in subsidized loans)
- Third year and beyond: $10,500 (no more than $5,500 of this amount may be in subsidized loans)
Graduate and professional degree student:
$20,500 (no more than $8,500 of this amount may be in subsidized loans)
Where can I spend the money?
You can use your Stafford loan to pay for tuition and education-related expenses, such as books and housing. After you tuition has been paid, it is up to you how you spend the money. Of course, remember that whatever you spend you'll eventually have to pay back.
Interest Rates and Fees
Stafford loans awarded after July 1, 2008 have a fixed interest rate of 6.8 percent. You may be charged up to a 1 percent guarantee fee and a 1.5 percent origination fee.
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After reading Stafford Loans | Understanding Stafford Student Loan, you should understand how Stafford loans work. Learn about PLUS loans in the next section, Parent PLUS Loans | Understanding PLUS Loans.