Funding Your Education 1997-98

Federal and Direct Stafford Loans (part 1 of 2)

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How do I qualify for a Stafford Loan?

How do I apply for a Stafford Loan?

How will I receive the loan funds?

Stafford Loans are the Department's major type of loans. An increasing number of schools are participating in the Direct Loan Program. Under this program, the funds for your Stafford Loan come directly from the federal government. If your school does not yet participate in Direct Loans, the funds for your Stafford Loan will come from a bank, credit union, or other lender that participates in the Federal Family Education Loan (FFEL) Program. The terms and conditions of a Direct Stafford and those of a FFEL Stafford are the same. The major differences between the two are

• the source of the loan funds,
• some aspects of the application process, and
• the administrative details of the repayment process.

How do I qualify for a Stafford Loan?

If you have financial need remaining after your Expected Family Contribution (EFC), Federal Pell Grant eligibility, and aid from other sources are subtracted from your cost of attendance, you can borrow a Stafford Loan to cover all or a portion of that remaining need. The government will pay the interest on your loan while you're in school, for the first six months after you leave school, and when you qualify to have your payments deferred. This type of loan is called a subsidized loan.

If you don't have financial need remaining, you may borrow a Stafford Loan for the amount of your EFC or the annual Stafford Loan borrowing limit for your grade level, whichever is less. (Annual loan limits are listed on this page.) You will be responsible for paying all of the interest on the loan. This type of loan is called an unsubsidized loan.

Because an unsubsidized loan is not awarded on the basis of need, your EFC isn't taken into account. If you don't receive enough need-based aid to meet your cost of attendance, you can pay for some of your remaining costs with an unsubsidized loan. You'll be charged interest from the time the loan is disbursed until it is paid in full. You can choose to pay the interest or allow it to accumulate and be capitalized (that is, added to the principal amount of your loan). You can receive a subsidized Stafford Loan and an unsubsidized Stafford Loan for the same enrollment period.

How do I apply for a Stafford Loan?

If your school participates in Direct Loans, the FAFSA serves as your Stafford Loan application. If your school participates in the FFEL Program, you will have to fill out a separate Stafford Loan application in addition to the FAFSA. In either case, after your FAFSA is processed, your school will review the results and will inform you about your loan eligibility.

How will I receive the loan funds?

For both the Direct Loan and FFEL programs, you'll be paid through your school in at least two installments. No installment may exceed one half of your loan amount. Your loan money must first be applied to pay for tuition and fees, room and board, and other school charges. If loan money remains, you'll receive the funds by check or in cash, unless you give the school written authorization to hold the funds until later in the enrollment period. If you give the school permission to hold your funds, the school may pay you the remaining funds as often as weekly or monthly.

If you're a first-year undergraduate student and a first-time borrower, your school cannot disburse your first payment until 30 days after the first day of your enrollment period. This way, you won't have to repay the loan if you don't begin classes or if you withdraw during the first 30 days of classes.

On to Part 2 of Federal and Direct Stafford Loans

Campus-Based Aid Programs | PLUS Loans (Loans for Parents)