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Stafford Loans

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Stafford Loans are also known as Federal Family Education Loans (FFEL) and William D. Ford Direct Loans (Direct Loans). The main difference between the FFEL and Direct Loan is that under FFEL, funds come from a participating bank while the Direct Loan is federally funded. Eligibility, rules and the amount you can receive is identical for both programs, only the repayment plans are different.

Applying for either program is done by filling out an FAFSA application either online or at your school’s financial aid office. Once your application is processed your school reviews the results and will let you know about your eligibility.

Your Lender:

– If you are eligible, your lender for a Direct Loan is federally sourced.

– If you are eligible for a FFEL you will need to choose a lender. You can select any lender you want. Your school may have a list of preferred lenders but you don’t necessarily have to choose from among them, you are free to choose.

How to choose one? Shop around to find the best deal! What interest rates are they offering? What are their terms for repayment? Do they offer discounts if you agree to automatic repayment? Are they easy to reach when you need them? These are some of the questions on which you need to base your decision.

Loan amount:

First of all, depending on your financial needs and situation (i.e., your FAFSA result), you may be eligible for a subsidized loan. The subsidized loan means the government will pay your interest while you’re in school and for the first 6 months after you finish, including if you’re eligible for deferred payments.

Dependent undergraduate students, you can receive up to $2,625 if you’re in your first year and full-time. You can receive up to $3,500 if you have done your first year and you are still a full-time student. You can receive $5,500 if you have done 2 years of study and you are a full-time student. If you are a dependent undergraduate and you do not fit these criteria (if you are part-time for example) you may still receive loans, but the amount will probably not be the maximum allowed. The amount you will receive will be based on your FAFSA results.

Independent undergraduate students and dependent students, if your parents aren’t eligible for a Plus Loan you can borrow up to $6,625 as long as you’re a full-time first year student. You can borrow up to $7,500 if you have completed your first year and are still a full-time student. Once you have completed the second year of your program and are still a full-time student you can borrow up to $10,500 per year. If you are an independent undergraduate and you do not fit these criteria (if you are part-time for example) you may still receive loans but the amount will probably not be the maximum allowed. The amount you will receive will be based on your FAFSA results.

If you are approved for a loan it will come from your school. The school will first use the money to pay your fees (tuition, lodging, etc) then if there is any money leftover they will give it to you. In this case your balance has to be paid to you in two payments (each semester).

Please note that all loans offered after July 1st 2006 have an interest rate of 6.8% (prior to this date the rate was variable but couldn’t exceed 8.25%). Banks cannot give you a loan with an interest rate higher than 6.8%. Remember there is usually a one time fee of 4% on the amount of the loan. It is taken directly from the loan.

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