Stafford Loans are the most common source of loan funds. There are two types: subsidized and unsubsidized. Your FAFSA will establish your eligibility for both.
You may also qualify for a federal PLUS loan.
Subsidized Stafford Loans are need-based loans. Full time students may be eligible to borrow up to $3,500 the first academic year and $4,500 the second, and $5500 the third year and each year beyond. While you attend school, the federal government pays the interest on the loans, during the grace period before repayment begins, and during periods of deferment. Payments begin six months after you graduate, drop below half time, or withdraw from school. To qualify for a subsidized Stafford loan, you must meet all the requirements for federal financial aid and have had your eligibility for a Pell Grant determined.
Unsubsidized Stafford Loans are for all qualified students and are not based on income or assets. This means you have to meet the same requirements for the subsidized Stafford loan, but you don't have to demonstrate financial need. Students may borrow from the unsubsidized Stafford loan up to $6,000 per year. One main difference with the unsubsidized loan is that interest accrues from the time the loan is disbursed. Interest payments begin immediately but can be deferred while you are in school. Repayment begins six months after you graduate, drop below half time, or withdraw.
These low-interest loans have a variable rate, adjusted each July 1, with a cap of 8.25%. Total undergraduate borrowing may not exceed $23,000 for dependent students and $57,500 for independent students (no more than $23,000 of which may be in subsidized Stafford loans). Unless you qualify and opt for an alternative repayment plan, you must repay Stafford loans within 10 years.
Federal PLUS Loans enable parents of dependent undergraduates with good credit histories to borrow up to a maximum of the student's unmet costs. Federal Plus loans have a fixed interest rate of 8.5% and Direct Plus loans are fixed at 7.9%. Parents begin repayment 60 days after the final loan disbursement. To qualify for the PLUS loan, you must meet the requirements for federal financial aid. Your parents must meet some of these general requirements.
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