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Subsidized Stafford Loan - About Subsidized Stafford Loan - Specifics of a Subsidized Stafford Loan

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Prospective college students can take advantage of several financial aid programs open to the public to help them pay for their education. One of these programs is the William D. Ford Federal Direct Stafford Loan. It is available for anyone attending any accredited university, college, trade school, or technical school in an established academic or vocational program.

Specifics of a Subsidized Stafford Loan

The different types of federal student financial aid can be split up into two categories: grants and loans. Grants are money for education that does not have to be paid back. Stafford loans, on the other hand, must be paid back by making monthly payments once the education has been completed or otherwise terminated.

Stafford loans are further categorized into unsubsidized and subsidized versions. An unsubsidized Stafford Loan requires no proof of financial need, and amounts are determined by the school in accordance with federal maximum limits. Interest on the loan begins accumulating immediately upon receiving the loan.

In contrast, a subsidized Stafford Loan is based on the financial need of each student. The school determines the amount of the loan based on several factors: financial need, cost of attendance, and federal maximum Stafford Loan limits. No interest is charged while the student is attending school half-time to full-time. Grace periods and deferment are also available in many circumstances where interest and payback can also be put on hold.

The maximum amount it is possible to receive from a Subsidized Stafford Loan is based on several factors: year in school, dependent or independent status, and undergraduate or graduate study.

Dependent undergraduate students are eligible to receive up to a $3,500 Subsidized Stafford Loan in their first year. The second year, the amount rises to $4,500. In the third and subsequent years, the maximum amount is $5,500. In addition, there is a total maximum limit of $23,000.

Independent undergraduate students are eligible to receive the same amounts as dependent graduate students in Subsidized Stafford Loans. The only difference is that independent students are able to receive higher amounts in unsubsidized loans.

Once a student reaches graduate or professional studies, he or she is eligible to receive up to $8,500 in Subsidized Stafford Loans per year. The maximum amount of Subsidized Stafford Loans is a total of $65,500, including the amount of subsidized loans taken out while an undergraduate.

The interest rates for a Subsidized Stafford Loan vary from year-to-year, but the rate is fixed for the term of the loan. In 2010, the interest rate was fixed at 4.5%. For 2011, the fixed interest rate has dropped to 3.4%. In 2012, the rate will be 6.8%. In addition to the interest, a 1% origination fee is also charged.

How to Receive a Subsidized Stafford Loan

To receive a Subsidized Stafford Loan, the Free Application for Federal Student Aid (FAFSA) must be completed on the FAFSA website. After the application is completed, it will take up to three weeks to be processed. A blue Student Aid Report will arrive in the mail. This information must be verified and corrected, if necessary. It is then sent on to your school of choice for final processing.

The loan amount will first go toward tuition and books. The excess amount will be disbursed each term by a check from the financial aid office of the school. To be eligible for the loan, the following requirements must be met:

• Acceptance into an accredited program
• Be a U.S. citizen, permanent resident, or other eligible noncitizen
• Have a financial need for the loan
• Be registered for a minimum of half-time enrollment
• Have a high school diploma or GED
• If male, be registered with Selective Service
• Maintain minimum levels of academic progress

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