Federal Stafford Loans
Federal Stafford Loans
For the Stafford Loan Program, the student borrows funds from an authorized lender. There are two kinds of Stafford Loans-- Subsidized and Unsubsidized Stafford Loans. The interest rates on the loans are variable, and are adjusted July 1st of each year based on the treasury bill rates in effect at the time. Stafford Loan rates will not exceed 8.25%. Repayment of the loan starts six months after you stop attending school at least half-time.
Subsidized Stafford Loan.
"Subsidized" means that the federal government pays the interest on this loan while you are enrolled in school at least half-time, during the grace period, or during periods of authorized deferment. You must show financial need to receive this type of loan.
Unsubsidized Stafford Loan.
This loan is not based on financial need. "Unsubsidized" means that the federal government does not pay the loan interest at any time--you will be charged interest from the time that the loan is disbursed until it is paid in full. If you allow the interest to accumulate, it will be capitalized--that is, the accrued interest will be added to the principal amount of the loan and the subsequent interest accruals will be based on the higher principal amount. This, of course, will increase the total amount you have to repay. If you chose to pay the interest as it accumulates, you'll repay less in the long run.
There is a processing fee of no more than 4% assessed on the Stafford Loans. The fee is deducted proportionately from each disbursement. For example, on a $2,000 loan with two disbursements and a 4% fee, the student would actually receive two disbursements of $960.00 each.
Applying for Stafford Loans
-
As with other types of financial aid,
a student applies for a loan by filing a FAFSA.
-
When the Office of Student Financial
Aid receives the FAFSA results and any other supporting
documents requested, it sends the student an award letter
that includes the amount that the student can borrow under
the Stafford Loan programs.
-
The student indicates on the award letter
how much he or she wants to borrow, and returns it to Student
Financial Aid. (The student receives two copies of the letter,
and keeps one for personal records.)
-
Student Financial Aid adjusts the amount
of the loan as requested by the student and continues to
process the loan. The loan is not processed until a signed
award letter accepting the loan is received.
-
Prior to the start of classes (late July,
early August for the fall term) promissory notes are prepared.
For more information about Stafford Loan promissory notes,
see FFELP Loans.
- First-time borrowers under the Stafford Loan Program at UMSL are asked to complete entrance counseling (for more information, see FFELP loans. Loan funds will not be credited to a student's university account until both a promissory note is received and entrance counseling has been completed.