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Federal Stafford Loans: The facts

Undergraduate and graduate students can take out a fixed-rate federal Stafford loan at 6.8% APR to help meet the cost of a college education. Federal loans for college are guaranteed by the government. Depending upon your circumstances, you may be eligible for subsidised student loans. You won't need to pass a credit check and there are no repayments until after graduation.

How do federal Stafford loans work?

Basic eligibility for federal Stafford loans
You must be a U.S. citizen, enrolled on an accredited academic program on at least a half-time basis, having completed the Free Application for Federal Student Aid (FAFSA), having finished high school and not having defaulted on an existing federal loan. Subsidised and unsubsidised federal loans
A subsidised loan is granted to the applicant on the basis of financial need. You won't pay any interest when you're at college or during deferment. An unsubsidised federal loan isn't means tested, but you'll pay interest on the balance throughout your time at college and at any time when you've opted to defer repayment. Maximum amount that can be borrowed
The amount that you can borrow depends heavily upon whether you're classified as a dependent or independent student. The new total limit for unsubsidised loans is now $20,500. This can be supplemented with PLUS and private student loans. When and how will payment be made?
Your lender makes payment directly to your school by payment in both the fall and winter semesters. After the deduction of course costs, any remaining money will be transferred directly to your checking account. The cash can be used for any academic-related expenses, including accommodation, books and groceries.

Repaying Stafford loans

Stafford loan interest rates
Unsubsized federal loans are available at 6.8% APR and subsized Stafford loans cost just 3.4% APR for 2011/2012. Suitable repayment plans
You're able to choose from a range of affordable repayment plans. These include standard, graduated, income-based and extended repayment. You can spread the cost of repaying student debt over a period of up to 25 years. Deferment and forbearance
If you run into financial difficulties, you can delay repayment for up to three years. Unsubsidised student loans will continue to accrue interest, so the amount that you owe will go up. Never default on a student loan agreement.

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