Student Loans Pt 1 discussed two loan options —Federal PLUS Loans, and Federal Perkins Loans. Part 2 will discuss Direct Stafford Loans, as well as how to pay off student loans.
Direct Stafford Loans
- You can find two different kinds of Stafford Loans, both administered by the U.S. Department of Education. The FFEL (Federal Family Education Loan)—funded by private lenders, and the William D. Ford Direct Loan program— funded by the federal government.
- The government pays loan interest while the student is at least half-time.
- Financial needs determine recipients.
- Six months after leaving school the student must assume payment of loan interest as well as principal payment.
- Undergraduate student interest rates:
-
- 2010-2011—4.5 %
- 2011-2012—3.4 %
- 2012-2013—6.8 %
- Graduate student interest rates remain fixed at 6.8%
- Students who have served in the military since August 14, 2008 may be eligible for a reduced rate.
- Unsubsidized loans are available for those who do not qualify for government subsidized loans.
- Borrowing Limits:
- Dependent Student
- 1st year--$3,500
- 2nd year--$4,500
- Following years--$5,500
- Dependent Student
- Dependent, undergraduate students may borrow no more than $23,000
- Borrowing Limits:
- Independent students
- 1st year--$7,500 (3,500 subsidized, up to $4,000 unsubsidized)
- 2nd year—$8,500 ($4,500 subsidized, up to $4,000 unsubsidized)
- Following years--$10,500 ($5,500 subsidized, up to $5,000 unsubsidized)
- Independent students
- Undergraduate, independent students are limited to $23,000 in subsidized Loans. They may borrow up to $46,000 unsubsidized.
- Borrowing Limits:
- Graduate students
- Up to $20,500 a year, $8,500 of which is subsidized.
- Graduate students
- Students can claim interest that has been paid on their Stafford loan debt. This is good for up to a $2,500 write-off on tax money.
Student Loan Application Process
- Federal loans use FAFSA, which can be found on paper or online. Applying for a loan is always cost-free.
Falling Behind on Payments?
- Credit score is reduced more than almost any other act except bankruptcy and can keep student from auto insurance or federal aid. It can also prohibit students from working government, school, or law enforcement jobs.
- Students unable to meet payments can ask for forbearance—for as long as twenty-four months, by filling out a form. During this time, regular loan payments can be suspended.
- Re-enrollment in school half-time defers payment as well.
- Active service in the military duty can defer loan payment.
