Questions About Federal Stafford Loans

1. Disbursements

Most Stafford loans are sent in two disbursements. Typically one for the Fall semester and one for the Winter semester. One semester only loans are now sent in one disbursement at the beginning of the semester.

2. Interest Rate

• The Direct Stafford Loan interest rate is a fixed 3.4% for undergrad subsidized and 6.8% for undergrad unsubsidized and graduate sub and unsub. (For 2012-2013 the undergrad subsidized rate is scheduled to return to the standard rate of 6.8%)
• Loans borrowed prior to July 1, 2006, have variable interest rates with a cap of 8.25%.

3. Loan Fees

Stafford Loans require a 1% origination fee. In 2011-2012, there's an up-front rebate of 0.5%, so the net disbursement is 99.5% of the gross loan amount. The borrower must make the first 12 payments on time to keep the rebate.

Beginning with loans awarded on or after July 1, 2012, there will be no up-front rebate. Students will pay 1% at the time of disbursement, and so will receive 99% of the gross loan amount.

Federal Direct Plus Loan Program requires a 3% origination fee and a 1% default fee. There's an up-front rebate of 1.5%, so the net disbursement is 97.5% of the gross loan amount. The borrower must make the first 12 payments on time to keep the rebate.

Beginning with loans awarded on or after July 1, 2012, there is a 4% in origination fee deducted from each disbursement so the net disbursement is 96% of the gross loan amount.

4. Grace Period

Students have one 6-month grace period for every loan. If a student leaves school and returns, they can have their loans deferred again. However, a student only gets one grace period. Students should contact Direct Loans or go to www.StudentLoans.gov for more specific information. (See "Repayment" below.)

5. Enrollment Status

Students must be at least half-time to be eligible for a Federal Stafford Loan. This is a minimum of 6 credits for undergraduates. If a student drops below half time before the funds are fully disbursed, the loan will be removed or reduced depending on the situation. There are no exceptions to this rule.

6. Repayment

The interest rate in repayment is capped at 8.25%. Typically, if students consolidate their Federal Stafford Loans, Direct Loans will take the average of all their interest rates and figure one monthly loan payment based on that calculation. Therefore, because the in-school interest rate is lower, it is more beneficial to consolidate while in school or in the grace period. WARNING: Consolidating loans before the grace period or during the grace period can force a student to have a shorter grace period or lose the grace period all together. Students should contact Direct Loans or go to www.StudentLoans.gov for more specific information (on this site students can estimate their repayment amounts for all of their Direct Loans). Students can also log on to http://www.nslds.ed.gov/nslds_SA/ for their aggregate loan amount. What does that mean? The student can see all the Federal Student Loans they have taken out - aggregate is the total amount borrowed.

7. Loan Counseling

Students must complete entrance loan counseling before a loan is disbursed. This is available at www.StudentLoans.gov. Students typically need to complete this only one time at a school, but some situations may cause this to be required again if there has been a lapse in attendance.

8. Promissory Note

Students must complete the online loan entrance counseling and the promissory note before a loan will be processed. Students typically need to complete this only one time at a school, but some situations may cause this to be required again if there has been a lapse in attendance.

9. First-Time Borrowers

First-time borrowers must have a first-disbursement date 30 days after the semester begins. No excess loan funds can be disbursed until this time.

10. Loan Limits

Federal Stafford Loans are regulated by yearly and aggregate (total) loan limits. These are as follows: