If you’ve ever wondered “What is a Stafford Loan,” here’s as simple a definition as you’ll find: Stafford Loans are the most readily available way to pay for college, offering fixed-rate financial assistance for both undergraduates and graduates.
When you’re approved, the funds will be sent straight to your college to be used for tuition and fees. Any remaining money will be credited to your account to assist with the costs of textbooks and other expenses.
In this article, we’ll look at Stafford Loan limits, as well as the advantages of applying for and receiving such aid. Read on to make your dream of getting a college education a reality.
Do You Qualify for a Stafford Loan?
In order to be eligible for money from the Stafford Loan, a person must meet the following qualifications:
1. Must be enrolled at least half-time in college or be planning to do so.
2. You must either be a U.S. citizen, a U.S. permanent resident, or eligible non-citizen.
3. You must have submitted a FAFSA (Free Application for Federal Student Aid).
4. You can’t be in default of any education loan.
5. You must be accepted for enrollment or be attending a school that takes part in the Federal Family Education Loan Program.
Advantages of a Stafford Loan
The following are some of the primary benefits associated with a Stafford Loan:
1. You don’t have to start paying back the loan until after you graduate.
2. The accrued interest is tax deductible.
3. No credit check will be required for applicants.
4. Federal loan consolidation is available, meaning that up to 50% can be saved on monthly loan payments.
5. Interest rates remain fixed until the loan is repaid.
6. No early payment penalties.
7. Repayment plans include standard repayment (you pay a fixed amount each month), graduated repayment (payments become larger over time), income based repayment (monthly payments are based on the size of the loan and your yearly income), and extended repayment (payments can be extended out over 25 years).
The Difference between Subsidized and Unsubsidized
With subsidized loans, the interest rate is paid off by the government while the recipient is attending college at least part-time or during deferment periods. While unsubsidized loans are also federally guaranteed, they are not based on financial need, and interest will begin to accumulate once the loan is paid to the college of your choice. In most cases, however, payment on interest can be deferred until half a year after graduation.
Stafford Loan Limits
The explanation of Stafford loan limits applies to all loans awarded after July 1st, 2008. They are divided into two categories: dependent students and independent students. Dependent students are defined as those individuals who are receiving financial assistance from another source such as a parent. Independent students, meanwhile, are defined as anyone who has taken on the sole responsibility of paying for their college education.
If you’re unsure of your status, take a look at the following questions. If you can answer “yes” to any of these, then you’re considered independent for the purposes of applying for a Stafford Loan.
1. Are you a veteran of the U.S. military?
2. Are you currently on active duty with the U.S. Armed Forces for anything other than training?
3. Since the age of 13, have you been in foster care or been deemed a dependent ward of the court?
4. Are you married? Answer “yes” even if you’re separated.
5. Does your birthday fall before January 1st, 1989?
6. Have you ever been homeless or self-supporting with the risk of being homeless?
7. Has a court in your home state determined you to be an emancipated minor?
8. Do you support dependents who receive at least half of their funding from you (wives and children do not count)?
9. During this academic year, do you have children who will receive more than half of their support from you?
For dependent students, the annual loan limits during the first year of higher education are set at $5,500. Of this amount, $3,500 is subsidized, while the remaining $2,000 is unsubsidized.
The Stafford Loan provides dependent students with up to $6,500 during the second year of college. This is made up of $4,500 in subsidized money and $2,000 in unsubsidized funds.
Once the student enters the third year and beyond of their education, the limits imposed by the Stafford Loan rise to $7,500. Of this amount, $5,500 is subsidized and $2,000 is unsubsidized. The reason for the limit increase in the third year is simple: since the student has invested several years in obtaining a degree, they are more likely to see things through (at least I imagine that’s the way the U.S. government looks at it).
Since they are taking on a greater financial burden, independent students receive a greater amount of assistance from the Stafford Loan each year. The first two semesters, for example, will allow the student to receive a maximum of $9,500. Of that amount, $3,500 is subsidized and $6,000 unsubsidized.
The second year of school will see the loan limit rise to $10,500 for an independent student. $4,500 of this amount is subsidized, while the remaining $6,000 is unsubsidized.
During the third year and beyond, independent students can receive up to $12,500 in financial aid for college. $5,500 is subsidized and $7,000 is unsubsidized.
College students who have received their undergraduate degrees are also eligible to receive Stafford Loans. The limit for those seeking graduate or professional certification is $20,500 per year (of which $8,500 is subsidized and $12,000 is unsubsidized).
In addition to yearly Stafford Loan limits, there are also lifetime limitations. For dependent students seeking an undergraduate degree, a maximum of $31,000 may be obtained. Up to $23,000 of this amount may be subsidized. Undergraduate independents, meanwhile, may receive up to $57,500 during their lifetime.
The overall limit for those seeking a graduate degree is $138,500 (with up to $65,000 subsidized). For those seeking a professional degree in the medical field, the limit is set at $224,000.
No matter which level of college education you’re seeking, the Stafford Loan provides a substantial sum of fixed-rate assistance. Just keep in mind that it is a loan, so the money will have to be paid back over time. Still, for the cash-strapped student, it can mean the difference between getting a degree and entering the workforce with limited opportunities. Once you understand the Stafford Loan limits and how the process works, you’ll be well on your way towards a brighter future.
by Shane Rivers