A Stafford Loan is a federal loan for students attending college, university, and even some vocational schools. Stafford Loan interest rates vary, depending on whether you are an undergraduate or graduate student, and whether the loan is subsidized or unsubsidized. Stafford loans are administered by the U.S. Department of Education. Stafford Loan interest rates were variable before 1 July 2006, but loans disbursed after that date have a fixed rate, which depends on the type of loan.
Stafford Loans can be subsidized or unsubsidized. Both types of loans accrue interest at a lower rate while you are in school and during periods of deferment. You do not have to make payments on either type of loan while you are in school. After you finish school you will have a grace period, and then your loans enter active, or repayment status. The interest rate on your loan may be higher once you enter repayment status.
Unsubsidized loans are available to anyone who is eligible for the Stafford Loan program. You do not have to demonstrate financial need for these loans. You will be charged interest and your interest will accrue while you are in school, but you have the option of paying it as you go. If you choose not to pay the interest, it will be added to the balance of your loan, or capitalized. You will then be charged interest on the interest, in addition to the original amount of the loan.
For a subsidized Stafford Loan, you must demonstrate financial need. The interest on a subsidized loan accrues while you are in school, but the Federal government pays it for you until you finish school or drop below half-time enrollment, which is typically six semester hours. This means, in essence, you will not be charged for interest on a subsidized loan until after you have completed your education. Financial need is determined based on information you submit on the Free Application for Federal Student Aid, or FAFSA.
To qualify for a Stafford Loan, you must be a U.S. citizen or a qualified non-citizen enrolled at a college or university that participates in the Federal Stafford Loan program. You must fill out the FAFSA, which can be completed and submitted online. You cannot be in default on any prior educational loans. The U.S. Department of Education will review your FAFSA and determine how much money you are eligible to borrow.
The Department of Education will notify your college or university when your eligibility has been finalized. Check with your financial aid counselor for specific details regarding your Stafford Loan interest rates. You can also find the most current Stafford Loan interest rates, as well as the FAFSA form, by visiting the U.S. Department of Education website.