Stafford Loan
From Wikipedia, the free encyclopedia
| US Student loans |
| Regulatory framework |
|---|
| Higher Education Act of 1965 US Dept of Education FAFSA Cost of attendance |
| Distribution channels |
| Federal Direct Student Loan Program FFELP |
| Loan products |
| Perkins · Stafford PLUS · Consolidation Loans |
A Stafford Loan is a student loan offered to students enrolled in American institutions of higher education to help finance their education. The loans are offered under Title IV of the Higher Education Act of 1965 (with subsequent amendments) and are therefore guaranteed by the U.S. Department of Education either directly or through guarantee agencies. In 1988, Congress renamed the Federal Guaranteed Student Loan program the Robert T. Stafford Student Loan program, in honor of Senator Robert Stafford of Vermont, for his work on higher education. Stafford died in his hometown of Rutland in 2006.[1]
Because the loans are guaranteed by the full faith of the US Government, they are offered at a lower interest rate than the borrower would otherwise be able to get for a private loan. On the other hand, there are strict eligibility requirements and limits on Stafford loans, and they get special treatment in personal bankruptcy cases. Students applying for a Stafford loan must first complete a FAFSA.
Stafford loans are available to students either directly from the United States Department of Education through the Federal Direct Student Loan Program (FDSLP, also known as Direct) or from a private lender through the Federal Family Education Loan Program (FFELP).
No payments are expected on the loan while the student is enrolled full- or half-time — loans receive in-school deferment. This deferment continues for a six-month grace period after the student has either graduated or dropped out of a full-time program.
Stafford loans have a dual structure interest rate: Interest rates are variable while the student is in-school and for the grace period. Once they are in repayment, the interest rate can be fixed through Federal student loan consolidation.
Stafford loans are available both as subsidized and unsubsidized loans. Subsidized loans are offered to students based on demonstrated financial need; with these loans, interest is paid by the federal government while the student is enrolled and during the grace period.
Interest on Stafford loans was previously based on an adjustable formula: Rates were set annually based on the prevailing 91-day Treasury bill. As of July 1, 2006, however, all Stafford loans are issued with a fixed interest rate. For Direct loans and most loan providers, the rate is currently set at 6.80%.
As the new rate goes into effect, some loan providers are foregoing portions of the margin they are entitled to under the Federal program, offering interest rates lower than the standard rate. Many are also offering price incentives related to payment history, direct debit, etc. Collectively, interest rate reductions, principal reductions, and origination fee discounts are known as Borrower Benefits.
In addition, in repealing the Single Holder Rule, Congress also allows loan providers to compete for college consolidation loans that are available to students and former students with multiple loans. Specialized consolidation lenders and student loan providers compete on various incentives to attract customers.
[edit] External links
- Dept of Education overview of loan offers
- Federal Stafford Student Loan Website | StaffordLoan.com
- Educational Student Loan Videos & Articles
- FAFSA Loan: Insights into how private lenders sell student loans, from a former loan officer
- Learn about student loan options and compare the costs of Stafford, PLUS, and private student loans
- Little Engine Lender Directory for Students
- All the information you need about Stafford Loan
- Information on Stafford Loans
