Stafford Loans Tips

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Have you asked your adviser what they use to determine satisfactory academic progress for your federal aid?

Loan Stipulations and Academic Requirements

Not all loans have strictly financial stipulations associated with them. Many forms of federal financial aid will have academic requirements. For example, the Federal Stafford Loan Program stipulates that the student must be making satisfactory academic progress toward their degree.

Whether you continue to receive all of the federal college financing you are initially awarded is partially determined by your performance in your courses. While it is unlikely that you are attending college with the intention of getting bad grades, contact your financial aid adviser and ask what their criteria for determining satisfactory academic progress is.

If you know what their requirements are and start to notice your grades slipping you can take action early. This precaution could mean the difference between keeping and losing your Stafford Loan.

If you do start to have some problems related to your classes, coordinate with your financial aid and academic advisers to make sure you are on firm ground.

Have you asked about federal aid participation and loan default rates?

Available Now At Your Local Participating College

Stafford Loans and other forms of federal aid are a good way to help with college financing and accrue the lowest amount of interest possible. The important thing is to make sure that the schools you are considering participate in these various programs. Give the financial aid offices of your target schools a call and see if they offer the Federal Stafford Loan and other types of assistance.

Another important issue to ask about is a college's loan default rate. This is the percentage of students that have attended the school using federal aid and failed to pay back their loans.

The reason why this is important to you is because certain federal programs, like the Stafford Loan Program, are no longer offered once a school is determined to have a high default rate.

Now you can make a more informed decision about your college choices. You may still wish to attend a school that does not offer one of these loans, but at least you will be able to plan your budget knowing this. It eliminates any last minute financial surprises.

How much can you take out in Stafford Loans?

The Sky is the Limit ... Sort of

The annual limits placed on the Federal Stafford Loan, both subsidized and unsubsidized, cannot add up to more than $23,000 for dependent students and $46,000 for independent students.

For graduate students the Stafford Loan limit over the course of continuing education may not exceed $138,500. However, this figure includes the student's total Stafford Loans during undergraduate years too.

If you plan to attend graduate school and use federal loans as much as possible throughout your education, make sure you are aware of these total limits as well as the annual ones. Careful planning can result in maximizing your potential federal loans. If you do not plan for these factors you may end up applying for private loans at the last minute when you run out of federal funds.

What is the interest rate on Federal Stafford Loans?

Stafford Interest rates

Interest rates on your Federal Stafford Loans depend on when the loans were originally taken out. This is the breakdown for Stafford Loan rates.

If your loan was disbursed between July 1, 1998 and June 30, 2006, the rate is variable and can change on July 1 of every year. Though it is a variable rate, it can never be higher than 8.25 percent. The current rate for loans disbursed during that time period is 7.22 percent in repayment. If your are still in school, your grace period or deferment the rate is 6.62.

For Stafford Loans disbursed on or after July 1, 2006, the interest rate is fixed at 6.8 percent.

Figure out when your first disbursement was and this will tell you what your interest rate on Federal Stafford Loans is.

Do you qualify for loan forgiveness?

To Forgive or Not To Forgive ... Your Stafford Loans

Stafford Loan Forgiveness is similar to that of the federal Perkins Loan. This means that you can have part or all of your Stafford loans forgiven if you meet certain requirements.

If you declare bankruptcy and the court determines that repaying your Federal Stafford Loan would cause undue hardships, you can have 100 percent of the loan forgiven. The entire loan amount will also be forgiven in the case of total and permanent disability or death.

Teachers who work at schools designated as serving low-income families may have up to $5,000 of their loans wiped clean. If they specialize in certain areas, such as math or science, they may be eligible for up to $17,500 in forgiven loans.

It is a good idea to do some research and see if this is an opportunity you can take advantage of. Having large chunks of your student loans wiped out completely make sit much easier to minimize you loan debt.

have you completed either of the mandatory entrance and exit counseling sessions?

Entrance and Exit Counseling

The Federal Stafford Loan entrance and exit counseling is a valuable tool for students who are borrowing this form of school funding. It is also mandatory.

The entrance counseling is designed to introduce new students to the terms and conditions of their new loan, and to provide advice on managing a budget for college and living expenses. The counseling will take about 30 minutes and is done online.

The exit counseling, or exit interview, can also be completed online in about 30 minutes. During this time you will be informed about all of your rights and responsibilities as a borrower entering repayment. This is designed to fully inform you of the repayment process and how to manage your loans.

While both of these counseling sessions are done online, it is also a good idea to schedule one in person with one of your school's financial aid advisers. This is the time to ask any questions that you may have so that you are ready to fulfill your loan obligations.

Make sure that before you graduate and leave school you are confident in your knowledge of how to manage your loans from that point on.

Have you been informed of the various repayment options for Stafford Loans?

Stafford Loan Repayment Options

Stafford Loans made through the William D. Ford Federal Direct Program are often referred to as Direct Loans. Within this program, eligible students and parents borrow college funds directly from the U.S. Department of Education at participating colleges.

In this case there are no banks or outside guarantors involved. The Federal Government is providing the loan. They will also handle all maintenance of the loan, including repayment options, consolidation and deferments or forbearance.

Direct Stafford Loans can be both subsidized and unsubsidized, as well as Direct PLUS and Direct Consolidation Loans.

When entering the repayment period for these school loans there are four available options to choose from. The Standard Repayment Plan will require a minimum monthly payment of at least $50 over a span of up to 10 years.

The Income Contingent Repayment Plan determines monthly payments based on your loan amount, family size and annual income. The Extended Repayment Plan lets the borrower extend the length of the loan repayment period to anywhere between 12 and 30 years.

The last option is the Graduated Repayment Plan, under which payments will be smaller in the first few years and increase every two years over a 12 to 30 years span.

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