OVERVIEW
Schools generally participate in either the Federal Family Education Loan Program (FFELP) or Federal Direct Loan Program but sometimes participate in both. Contact the school's Financial Aid Office to determine which federal loan programs are available. Stafford loans are for undergraduate and graduate and professional students through one of two U.S. Department of Education programs:

1. FFELP loans are offered by private lenders, usually available in your home town. Borrowers can choose a FFELP lender from the school's preferred list or elect to use a FFELP lender of their choice.
2. Federal Direct Loan Program loans are offered to borrowers directly from the Federal Department of Education.

Based on financial need as demonstrated on the Free Application for Federal Student Aid (FAFSA), a borrower may receive subsidized or unsubsidized Stafford loan funds.

A subsidized Stafford loan refers to loan funds where the government pays the interest for the borrower while the borrower is in school or in an eligible deferment.

An unsubsidized Stafford loan refers to loan funds where the borrower is completely responsible for all interest that accrues on the loan.

In either case, loan funds are usually disbursed directly to the school on the borrower's behalf. Loan funds are then applied to a student's account within three business days.

LOAN LIMITS
According to federal regulations, borrowers are limited to certain amount of loan funds each year based on their dependency status and year in school.

Dependent students (as defined on the FAFSA) are allowed to borrow up to $3,500 their freshman year, $4,500 their sophomore year, and $5,500 for each remaining year. Dependent students may borrower an additional $6,000 the first two years and $7,000 the remaining years if their parents are denied a PLUS Loan.

Independent students are allowed to borrow up to $9,500 their freshman year, $10,500 their sophomore year, and $12,500 for each remaining year.

Graduate students may borrow up to $20,500 per year in Stafford loans.

Additionally, dependent undergraduates may not exceed a combined total of $31,000 in Stafford loan funds (no more than $23,000 of which may be subsidized), $57,500 (no more than $23,000 of which may be subsidized) for independent undergraduate students (or students whose parents were denied a PLUS Loan), or $138,500 for graduate students (no more than $65,000 of which may be subsidized).

INTEREST RATES
The interest rate on Stafford loans first disbursed beginning July 1, 2008:

Subsidized Stafford loans for undergraduate students have a declining fixed interest rate.

• July 1, 2008 - June 30, 2009 the interest rate is 6%.
• July 1, 2009 - June 30, 2010 the interest rate is 5.6%.
• July 1, 2010 - June 30, 2011 the interest rate is 4.5%.
• July 1, 2011 - June 30, 2012 the interest rate is 3.4%.

Beginning July 1, 2012 the rate is 6.8%.

Subsidized Stafford loans for graduate and professional student and all unsubsidized Stafford loans is 6.8%.

STAFFORD LOAN REPAYMENT
Stafford loan borrowers are given many opportunities to defer payments, but ultimately every Stafford loan must be repaid. However, borrowers are given deferments, forbearances, and multiple repayment options to help them meet their student loan obligations.

APPLICATION PROCESS
Prospective borrowers should contact their financial aid offices to find out if they qualify for a Federal Stafford loan. Once borrowers have received an award letter from their institution, they may fill out a Federal Stafford Loan Master Promissory Note that will be mailed to a lender of their choice.

Once the guarantor receives the school's certification of the student's eligibility and the lender has received the borrower's Master Promissory Note, loan funds will be disbursed.