Federal Stafford loans are available to undergraduate and graduate students to help finance their own education. They come in two varieties:

A subsidized Stafford loan is based on financial need. The federal government pays the interest for the student during the following periods:

• While the student is enrolled in school at least half time
• During the six-month grace period after the student drops below half-time enrollment
• During a period of deferment (a period when payments of principal are temporarily postponed)

An unsubsidized Stafford loan is not based on financial need. An unsubsidized Stafford loan is available to a student who does not qualify for a subsidized loan or to supplement a student's subsidized loan. The student is responsible for paying all of the interest on an unsubsidized loan.

Interest rate and fees

• For a subsidized Stafford loan made to an undergraduate student for which the first disbursement is made on or after:
  
  

  July 1, 2008, and before July 1, 2009	6.0%
  July 1, 2009, and before July 1, 2010	5.6%
  July 1, 2010, and before July 1, 2011	4.5%
  July 1, 2011, and before July 1, 2012	3.4%

  Note: The interest rate for each loan period remains fixed for the life of the loan.

• For an unsubsidized Stafford loan made to an undergraduate student or any Stafford loan (subsidized or unsubsidized) made to a graduate student for which the first disbursement is made on or after July 1, 2006, the fixed interest rate is 6.8%*.
• Federal law requires certain fees be charged for each Stafford loan made, including a 1% origination fee (for loans first disbursed on or after July 1, 2008 and before July 1, 2009) and a 1% federal default fee (previously called a guarantee fee). The law specifies the maximum amount of each fee and authorizes both fees to be deducted from the loan amount. Fees charged to the borrower are deducted from the loan proceeds when the money is sent to the student's school.

* An eligible borrower may request, under the Servicemembers Civil Relief Act, an interest rate reduction to 6.0% on any FFELP loan made prior to the beginning of the borrower's military service or activation. The request must be received no later than 180 days after the date of the borrower's termination or release from military service. The borrower should contact his or her lender for more information.

How to apply
A student can request a Stafford loan by completing the Free Application for Federal Student Aid (FAFSA). The student can complete the FAFSA online at www.fafsa.ed.gov. For assistance with the FAFSA process, call (800) 845-6267.

The FAFSA requires the student to list the schools he or she is considering attending. Information from the FAFSA will be sent to each of these schools. The school generally informs the student of the financial aid programs for which he or she qualifies (including Stafford loans) and of the next steps required to receive the Stafford loan and other financial aid.

The student must also complete the Federal Stafford Loan Master Promissory Note (MPN) and submit it to the school or lender, as directed, in order to receive a Stafford loan (the form may be completed online or obtained from a school or lender). Generally, one MPN will cover all of the Stafford loans the student borrows. However, there may be circumstances under which the borrower is required to complete more than one MPN. The school or lender will inform the borrower in these cases. The borrower may also request a new MPN any time he or she borrows.

After a lender approves a Stafford loan, the borrower receives a disclosure statement confirming the loan's guarantee and providing details and terms of the loan. This disclosure becomes part of the MPN, so the borrower is encouraged to keep this document until the loan is paid in full. The borrower should contact the lender if he or she has any questions.

Loan amounts
The school decides how much a student can borrow in a Stafford loan, based on federal law. A school will award a student with financial need as much as possible in a subsidized Stafford loan.

The most that a student can borrow in subsidized and unsubsidized Stafford loans annually is equal to the student's cost of attendance minus other estimated financial assistance, without going over the maximum amounts permitted for the student's academic level (see below). These limits are effective July 1, 2008.

¹ Certain health profession students may qualify for higher limits.

² All undergraduate Stafford annual loan limits are subject to proration.

³ The borrower may receive less than the maximum if he or she receives other financial aid that is used to cover the cost of attendance. Keep in mind that the federal government will pay interest on only subsidized Stafford loans while the student is in school.

Loan amount changes
The school may adjust the loan amount if the borrower's financial circumstances or the student's enrollment status changes. For example, if a student changes his or her program of study or receives additional financial aid funds, the school may be required to reduce the amount of the Stafford loan.

The borrower may reduce the loan amount after guarantee by informing the school or the lender. The borrower can also reduce or decline a Stafford loan, or even return all or part of the loan, up to 120 days after funds have been disbursed.

In most cases, the loan will be delivered in two equal amounts — half at the beginning of the school year, and half midway through the school year.

Who qualifies
Stafford loans are available to undergraduate students and graduate students who, among other eligibility criteria, are:

• U.S. citizens or eligible noncitizens
• Enrolled or accepted for enrollment at least half time in an eligible program at an eligible school
• Registered with the U.S. Selective Service System (for males not exempt from registration)

A borrower may not qualify if he or she has defaulted on a federal education loan, owes an overpayment on other federal student aid, has been convicted of a drug-related offense while receiving federal student aid, or is incarcerated. The borrower also may be ineligible if, while receiving federal student aid, he or she has been convicted of or has pled nolo contendere or guilty to a crime involving fraud in obtaining Title IV funds and has not completed the repayment of such funds.

Full details on eligibility are provided with the Federal Stafford Loan MPN, the form students sign to obtain Stafford loans.

Paying back the loan
No payment of principal is required while the student is in school or for six months afterward (this six-month interval is called a grace period). On subsidized Stafford loans, the interest is paid by the federal government during this time. On unsubsidized Stafford loans, the student is responsible for all interest and can pay it while in school or allow it to be capitalized (added to the principal). Students begin repaying Stafford loans six months after they drop below half-time enrollment. In addition:

• A $50-per-month minimum payment is required unless the borrower makes other arrangements with the lender.
• The payment amount must be equal to at least the monthly interest due on the loan.
• The standard repayment term is generally 10 years.
• Borrowers may choose a repayment plan suited to their needs. Lenders can provide details.
• Stafford loan borrowers may have their payments temporarily postponed under certain conditions (options known as deferment and forbearance).
• Some lenders offer discounted interest rates for on-time payment.
• There is no penalty for early repayment.

Back to Top

Stafford MPN Forms

2008-2009 Interest Rates

TG Customer Assistance
(800) 845-6267
cust.assist@tgslc.org