Federal Stafford Loan Program

There are two types of Federal Stafford Loans available: subsidized and unsubsidized. Eligibility for subsidized Federal Stafford Loans is based on financial need, and the federal government pays the interest on your behalf while you are enrolled at least half-time, during your grace period, and authorized deferment periods. Eligibility for unsubsidized Federal Stafford Loans is not based on financial need, but you are responsible for paying interest at all times. You may pay this interest while in school, or you can allow it to accrue and capitalize and it will be added to your principal balance to be paid off with the rest of your loan when you stop attending on at least a half-time basis.

Eligibility

 To be eligible, you must:

• Be a U.S. citizen or an eligible non-citizen
• Have a high school diploma or GED certificate
• Attend school on at least a half-time basis, and be working toward an eligible degree or certificate (see the Additional Information on Loan Limits section of this page for possible exceptions to this requirement)
• Comply with federal Selective Service registration requirements
• Not be in default on any student loan, nor owe a refund on any state or federal grant
• Maintain satisfactory academic progress as determined by your graduate or professional school

Choosing a Lender

When borrowing through the Federal Family Education Loan Program, your loan comes from a lending institution. Borrowers are free to select whichever lender they choose, so you may want to compare the level of benefits and customer service offered by various lenders and choose based on which one best meets your individual needs. There are several factors you may wish to take into consideration, such as whether a lender discounts the federal loan fees, or if rebates or other special discounts are offered for making a series of consecutive, on-time payments.

The U.S. Department of Education (ED) and the Federal Trade Commission (FTC) offer Student Loans: Avoiding Deceptive Offers, which is a free consumer guide for college students (and their families) seeking new loans or consolidating existing loans.

How to Apply

The application processes for both the subsidized and unsubsidized Federal Stafford Loans are the same. Complete the online Free Application for Federal Student Aid (FAFSA).  In order to be eligible for the unsubsidized Federal Stafford Loan, you must first apply for the subsidized loan. Check with your graduate or professional school's financial aid office to determine if any additional forms are needed. The financial aid administrator at your graduate or professional school determines your eligibility for both loan types.

Once determined eligible, your school will submit your student loan information to ISAC or another guaranty agency (if your school participates in FFELP) through either an electronic or paper process. Before loan funds can be disbursed to the school on your behalf, you must complete and sign a Master Promissory Note (MPN). An MPN is a legal-binding document on which you promise to repay the funds disbursed, plus interest, to your lender.

Eligibility Formulas - Subsidized Stafford Loan

Cost of attendance
-		(MINUS) Expected Family Contribution (determined by completing your FAFSA)
-		(MINUS) Other financial aid you’re expected to receive (grants, scholarships, Federal Work-Study, other loans)
=		(EQUALS) Subsidized Federal Stafford Loan eligibility (not to exceed the program loan limit maximums)

Eligibility Formulas - Unsubsidized Stafford Loan

If you have limited or no subsidized Federal Stafford Loan eligibility, the financial aid administrator can determine if you are eligible for an unsubsidized Federal Stafford Loan.

Cost of attendance
-		(MINUS) Other financial aid you’re expected to receive (including a subsidized Federal Stafford Loan)
=		(EQUALS) Unsubsidized Federal Stafford Loan eligibility (not to exceed the program loan limit maximums)

Current Interest Rates for Federal Stafford Loans 

The interest rate on unsubsidized Federal Stafford Loans for undergraduate students, as well as subsidized and unsubsidized loans for graduate students, is fixed at 6.8%.

Loans disbursed prior to June 30, 2006 have a variable interest rate adjusted annually on July 1, with a maximum of 8.25 %. The subsidized and unsubsidized Federal Stafford Loan variable interest rate for the period July 1, 2008 through June 30, 2009 is 3.61% for loans during in-school, grace and deferment periods, and 4.21% for loans in repayment.

Federal Stafford Loan Limits

Maximum annual limits for undergraduate and graduate students are monitored by the college based on federal regulations. Below is the loan limits chart for loans disbursed on or after July 1, 2008.

Annual Limits	Subsidized	Total (Subsidized & Unsubsidized)
Dependent Undergraduates
First Year	$3,500	$5,500
Second Year	$4,500	$6,500
Third Year and higher	$5,500	$7,500
Independent Undergraduates*
First Year	$3,500	$9,500
Second Year	$4,500	$10,500
Third Year and higher	$5,500	$12,500
Graduate and Professional Students	$8,500	$20,500
Aggregate Limits	Subsidized	Total (Subsidized & Unsubsidized)
Dependent Undergraduates	$23,000	$31,000
Independent Undergraduates*	$23,000	$57,500
Graduate and Professional Students	$65,500	$138,500

Additional Information on Loan Limits

• Certain health professions students may qualify for increased loan limits depending on the program of study.
• Annual loan limits for undergraduate students are prorated.
• *Independent students may qualify for additional unsubsidized Stafford loan amounts. Dependent students may also qualify for additional amounts if determined eligible by the financial aid administrator or if the parents do not qualify for a Federal PLUS loan.
• Preparatory and Teacher Certification students may qualify for a Stafford loan, even if they are not enrolled in a degree program. See the U.S. Department of Education's Transition to Teaching page or contact your college's Financial Aid Office for details.

A federal loan origination fee (which is gradually reduced as outlined in the chart below) is deducted from your loan proceeds prior to disbursement.

A default fee (formerly the guarantee fee) is also charged on the proceeds prior to disbursement. For loans guaranteed by ISAC on or after July 15, 2008, ISAC pays one-quarter (25%) of the one-percent federally-mandated default fee as a benefit to the borrower, with the remaining portion to be paid by either the lender or the student borrower. (Continuation of this benefit is subject to periodic review).

The following chart shows the schedule for reducing the origination fees on subsidized and unsubsidized FFELP loans.

Loans are generally disbursed in at least two installments, but qualifying colleges may make single disbursements for single-term (one semester, one trimester, one quarter or 4 months) loans. Check with the financial aid office at your college to learn how your loan(s) will be disbursed.

Loan proceeds are either electronically transmitted or mailed directly to the institution.

Repayment Provisions

You must start repaying both principal and interest on your subsidized Stafford loan six months after graduation, or after you drop below half-time enrollment. If you have an unsubsidized Stafford loan, you will be responsible for paying the interest on your loan from the day it is disbursed (there are options for paying the interest, which can be worked out with your lender).  Like a subsidized loan, repayment of principal on an unsubsidized loan begins six months after graduation or after you drop below half-time enrollment.

Most student loan payments are set up on a standard repayment plan with monthly payments that remain the same throughout the repayment period.  However, there are other plans available that may make your payments more manageable.

Deferment, forbearance and forgiveness (cancellation) options are available for both types of Federal Stafford Loans. Both principal and interest will be deferred on subsidized loans, while unsubsidized borrowers can defer only the principal portion of payments. Payment of interest on an unsubsidized loan during a deferment is your responsibility. The interest can either be paid on a monthly or quarterly basis, or it can be added into the principal balance of the loan at the time regular payments resume after expiration of the deferment. Contact your loan holder (lender) to obtain the forms needed to apply for federal deferment, forbearance and loan forgiveness programs.

The State of Illinois also offers help with loan repayment for Illinois residents who qualify based on certain eligibility requirements. Further details are provided in the Loan Repayment/Forgiveness section of the Student Zone.

Click here to access the online Free Application for Federal Student Aid (FAFSA).