What are Federal Stafford Loans?
A Federal Stafford Loan is a student loan in the student’s name for educational purposes. The loan uses private lender funds but they are guaranteed by the Federal government. It is categorized as either “subsidized” or “unsubsidized.” Loan repayment is deferred while the student is enrolled in school at least half-time and during the 6-month grace period after the student either graduates or drops below half-time. When the grace period is finished, the student starts repayment on the loan. However, if the student decides to go to graduate school, the Federal Stafford Loan will go back into deferment.
What is the difference between a “Subsidized” and an “Unsubsidized” Federal Stafford Loan?
The financial need of a family determines whether a Federal Stafford loan is subsidized. The federal government “subsidizes” the interest of the loan, i.e. pays the interest, while the student is enrolled at least half-time and during the grace period. Therefore, the student is not charged any interest for the loan before repayment begins.
An unsubsidized Federal Stafford loan is not awarded based on financial need. The student will be charged interest on the loan from the time it disburses until it is paid in full. The student has two options: To defer interest payments until graduation in which case the interest will be added to the principal amount of the loan or to pay the interest while in school and not have it accrue.
How much can the student borrow in Federal Stafford Loans?
Dependent undergraduates have a Federal Stafford loan maximum amount that they can borrow per academic year: For 2007-2008, the amounts are as follows:
- $3500 for freshmen
- $4500 for sophomores
- $5500 for juniors
- $5500 for seniors
Independent undergraduates can borrow the same amounts as above, plus an additional $4000 of unsubsidized Federal Stafford Loans for freshmen and sophomores, and $5000 for juniors and seniors.
What is the interest rate on Federal Stafford Loans?
How does the student apply for a Federal Stafford Loan?
The student applies for financial aid by completing the application process which always includes filling out the FAFSA and the Wheaton College financial aid application. Other documentation may also be required. Federal Stafford loans are then automatically considered as part of the financial aid package. The student can choose to accept or decline the loan, or accept but with a lowered amount.
When a student takes out a Federal Stafford loan for the first time, he must choose a lender; once he has done so, the Financial Aid Office can certify the loan with the lender. The lender then asks the student as a first-time borrower with Wheaton to complete a Master Promissory Note (which can be done online with the lenders on our list). The student will also be asked to complete “Federal Stafford Loan Entrance Counseling,” a process which involves the student’s reading and understanding conditions for borrowing Federal Stafford funds.
Once all documentation has been completed and the loan has been approved, the lender sends the funds to Wheaton College, and we disburse them directly into the student’s student account on campus.
