A Stafford Loan is a student loan offered to eligible students enrolled in an accredited American higher education institution to help finance their education. The terms of the loan are described in Title IV of the Higher Education Act of 1965 (with subsequent amendments), which guarantees repayment to the creditor if a student fails.
In 1988, Congress renamed the Student Loans Guaranteed Program of Federal Student Loans Robert T. Stafford, in honor of US Senator Robert Stafford, a Republican of Vermont, for his work on higher education.
Because loans are guaranteed by the full trust of the U.S. government, they are offered with lower interest rates than the borrowers can earn for personal loans. On the other hand, there are stringent eligibility requirements and loan limits on Stafford Loans.
Students applying for Stafford Loans or other federal financial assistance must first complete the FAFSA. Stafford Loans are available to students directly from the US Department of Education through the Federal Direct Student Loan Program (FDSLP, also known as Direct).
No principal payments are expected for loans while students at school are enrolled at least half the time, which is called a delay in school. Postponement of payments continues for six months after students leave school by graduation, dropping below enrollment part time, or withdrawing, referred to as grace period.
Stafford Loans are available as both subsidized and unsubsidized loans. Subsidized loans are offered to students based on the financial needs shown. (See Expected Family Contributions.) The interest on subsidized loans is paid by the federal government while students are in school and during official delays. For Stafford Unsubsidized loans, students are responsible for all interest arising when students enroll in school. Interest may be suspended during registration. Unpaid interest is deferred until after graduation is capitalized (added to principal).
The Budget Control Act of 2011 abolished Stafford subsidized loans for graduate and professional students effective July 1, 2012. Unsubsidized Stafford loans are still available for these students.
Video Stafford Loan
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Interest rates of Stafford Loans may vary and are determined by the date on which the loan is withdrawn. They may also vary based on the level of education (undergraduate or graduate) of the students. Interest rates do not vary with default risk: all students receive the same interest rate regardless of their primary employment prospects or future prospects.
For loans with variable interest rates, tariffs are set annually using the 91-day Treasury charge price on the last Monday of May, and become effective for the next year on July 1st. For the 2008-2009 fiscal year, the 91-day Treasury bill was tendered on May 27, 2008 at 1.905% (rounded to 1.91%) used for calculation. On May 26, 2009, the 91-day Treasury Bill was auctioned at an investment rate of 0.178%. On July 1, 2009, the base rate for the Stafford Loan variable rate adjusted to 0.18%. Loans issued before July 1, 1998 are adjusted to the level of 3.28%. Loans issued between 1 July 1998 and 30 June 2006 are adjusted to the 2.48% rate.
On July 1, 2006, all Stafford Loans were issued at a fixed rate. For direct loans and most lenders, the current tariff is set at 6.80% for unsubsidized loans, with low interest rates for subsidized loans for students, usually around 3.40%.
On August 9, 2013, President Obama signed the 2013 Bipartisan Student Loan Ensure Act, changing the way student lending rates are determined. The bill links student loans to Federal 10-year Treasury rate, plus a small margin. The new tariff is applied retroactively for all loans disbursed on or after July 1, 2013. It effectively reverses the interest rate increase from 3.40% to 6.80% for affected loans. Federal student loan interest rates are set for the loan term; however, interest rates for new loans will change every year, based on the current market. Interest rates for the academic year 2013-2014 are as follows: 3.86% for Stafford undergraduate loans (both subsidized and subsidized) 5.41% for Stafford Loans Loans
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See also
- Credit release
References
External links
Financial Aid at Curlie (based on DMOZ)
Source of the article : Wikipedia
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