Stafford Loan Frequently Asked Questions

New rules and rates took effect in 2010

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Updated 8/9/2013

  1. How much can I borrow from the Stafford program?
  2. How much do Stafford loans cost?
  3. How do I get a Stafford loan?
  4. Does every student get approved for a Stafford loan?
  5. How is the credit crunch affecting Stafford loans?
  6. Are Stafford loan payments tax deductible?
  7. When do I have to start repaying my Stafford loan?
  8. What happens if I lose my job or get into other financial trouble?
  9. What are the advantages of a Stafford loan?
  10. What are the downsides of Stafford loans?

  11. How much can I borrow from the Stafford program?


    Undergraduates who are legal residents, haven't defaulted on other federal student loans and attend college at least half-time can borrow at least $5,500 a year. Students who are financially dependent on their parents will be limited to loans of no more than $5,500 in the first year, $6,500 in the second year and $7,500 annually in the remaining undergraduate years. Dependent students whose parents have been rejected for a PLUS loan can borrow a limited amount of extra money through the Stafford program. Dependent students are not allowed to borrow more than $31,000 in total through the Stafford program during undergraduate studies. Students who are independent can borrow as much as $9,500 in the first or freshman year, $10,500 in the second or sophomore year and $12,500 annually during their remaining school years. These students cannot borrow more than a total of $57,500.
    Back to top How much do Stafford loans cost?


    Stafford loans come in two forms: subsidized and unsubsidized. All undergraduates are eligible for the latter, but the former are reserved for students who demonstrate financial need. Interest rates on both types of loans are set annually using the interest rate on the 10-year Treasury note as of June 1 as a benchmark. The rates are locked in for the life of the loan, but interest rates for new loans will fluctuate from year to year. For undergraduates, that rate is the Treasury note plus 2.05 percent, but is capped at 8.25 percent. Subsidized loans do not accrue interest while a student is enrolled at least half time, but unsubsidized loans being accumulating interest immediately.


    Back to top
    How do I get a Stafford loan?


    You, and if you are not qualified as an independent student, your parents, must fill out a FAFSA, preferably by Feb. 15. (But it's never too late.)
    Back to top Does every student get approved for a Stafford loan?


    Almost. Students who are only attending college part-time, have defaulted on other college loans,or who are not U.S. citizens do not qualify.
    Back to top How is the credit crunch affecting Stafford loans?


    Stafford loans are funded by the federal government, so they remain available to all qualified students.
    Back to top Are Stafford loan payments tax deductible?


    It depends on your income when you start repaying. Generally, a single person earning less than $75,000 can deduct up to $2,500 of student loan interest payments.
    Back to top When do I have to start repaying my Stafford loan?


    The first bill comes due six months after you've left school, whether that's after graduation or after you've dropped out.
    Back to top What happens if I lose my job or get into other financial trouble?


    Graduates entering repayment should call the Department of Education to find out about options such as Income-Based repayment. If payments are still unaffordable, borrowers can inquire about a deferral or forbearance, both of while temporarily delay repayment. Students can also try these 11 Steps to Student Loan Relief.
    Back to top What are the advantages of a Stafford loan?


    Stafford loans have a low fixed interest rate, so the size of your payment won't increase if interest rates rise. They also offer free insurance, so the debt will be canceled if the student dies or becomes disabled. Stafford borrowers can ask to have their payments capped at 15 percent of their disposable income, or deferred if they get into financial trouble. And public servants who make 10 years' worth of income-based repayments can have their remaining Stafford debt forgiven.