Stafford loan are fixed rate student loans specifically for undergraduate students in universities or colleges and are participating in direct loan program. This kind of loan can be used in tuition payment and also other eligible school expenses. The loan is not based on credit. The student loan can be subsidized or unsubsidized it depending on the financial needs.
Subsidized Stafford loans
These are federal guaranteed loans which are based on financial need basis. The interest in this kind of loan does not accrue when the student is still in school or even during deferment periods. During these times it is the federal government that pays for the interests.
Unsubsidized Stafford loans
These are federal guaranteed loans that are not given on financial need basis. The loan accrues interest from the disbursement period. However, it can be deferred until elapse of 6 months after graduation.
An undergraduate Stafford loan benefits from low interest rate which is fixed and goes as low as 3.4%. They also get increased limits of up to 12,000 US dollars a year all depending on the degree status as well as the number of years in school. Lastly, he/she will not get payments while still in school.
Both unsubsidised and subsidized student of this kind has Stafford loan limits which are annual and also cumulative. The cumulative loans are listed on student aid report. However, it is also advisable that you keep record of all the loan transactions. Moreover, you can get your loan history online at www.nslds.ed.gov site.
Those who have attained their lifetime Stafford loan limits are not eligible to receive any further loan of that type. On the other hand any student who exceeds their limits will have the amount disbursed billed back. This means that in such a case you will need an alternative means of financing your education.
In this respect, borrow only what you really need for your education expenses and also keep track on your cumulative debt. You can find ways of minimising your borrowing. A question that is commonly asked is the amount that a student can take out each year in Stafford loan limits. This kind of information is particularly useful as it helps you understand how much to borrow.
STAFFORD LOAN LIMITS
Year Annual Loan Limits
1st year $5,000( unsubsidized $2,000/ subsidized $3,500)
2nd year $6,500 ( unsubsidized $2,000/ subsidized $4,500)
3rd year onwards $7,500 ( unsubsidized $2,000/ subsidized $5,500)
Year Annual Loan Limits
1st year $9,500 (unsubsidized $6,000/ subsidized $3,500)
2nd year $10,500 (unsubsidized $6,000/ subsidized$4,500)
3rd year onwards $12,500 (unsubsidized $7,000/ subsidized $5,500)
Professional or Graduate $20,000 ( unsubsidized $12,000/ subsidized $8,500)
Your Status Limit
Undergraduate dependent $31,000 ( at most $23,000 can be subsidized)
Undergraduate independent $57,000
Professional or graduate $138,500 ( at most $65,000 can be subsidized) or $224,000 ( health professionals)
All these are in effect from 2008-2009
It is advised that before you apply for financial need assistance, you should search for scholarships if available