What is a Direct Stafford Loan Estimate?

A Direct Stafford Loan Estimate is a form provided by the Department of Education to eligible students. It provides an estimate of the amount of Direct Stafford Loan funds that the student may borrow for the upcoming academic year.

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What is a Stafford Loan?

A Stafford Loan is a student loan offered to eligible students enrolled in accredited colleges or universities to help finance their education. The loan is made by the U.S. Department of Education and is guaranteed by the federal government. Stafford Loans are available to both undergraduate and graduate students and can be used for expenses such as tuition and fees, room and board, books and supplies, and transportation.

There are two types of Stafford Loans: subsidized and unsubsidized. Subsidized Stafford Loans are need-based loans for which the federal government pays the interest while the borrower is in school, during their grace period, and during any periods of deferment or forbearance. Unsubsidized Stafford Loans are not need-based loans; the borrower is responsible for all interest that accrues on the loan from the time it is disbursed until it is paid in full.

The maximum amount that can be borrowed each year depends on the student’s grade level and whether they are dependent or independent students. For example, for dependent undergraduate students enrolled in their first year of study, the maximum annual loan limit is $5,500 ($3,500 of which can be subsidized). For independent undergraduate students enrolled in their first year of study, the maximum annual loan limit is $9,500 ($3,500 of which can be subsidized).

Students who are interested in applying for a Stafford Loan must first complete a Free Application for Federal Student Aid (FAFSA).

What is the difference between a Stafford Loan and other types of loans?

Stafford Loans are the most common type of federal student loan. Stafford Loans are available to both undergraduate and graduate students, and they can be either subsidized or unsubsidized.

PLUS Loans are federal loans that graduate or professional degree students and parents of dependent undergraduate students can use to help pay for college or career school. PLUS loans have a higher interest rate than Stafford Loans but they do not have an annual or aggregate limit.

Consolidation Loans allow you to combine all of your eligible federal student loans into a single loan with one monthly payment. This could lower your monthly payment by giving you up to 30 years to repay your loan.

How do I get a Stafford Loan?

To receive a Stafford Loan, you must first complete and submit the Free Application for Federal Student Aid (FAFSA®) form.
You can get a Stafford Loan as a subsidized or unsubsidized loan. Subsidized means the government pays the interest while you’re in college. Unsubsidized means you are responsible for the interest that accrues on the loan while you’re in school and during your grace period.
Stafford Loans are available to both undergraduate and graduate students. If you’re an eligible undergraduate student, you can borrow up to $5,500-$7,500 a year, depending on what year you are in school and other factors. If you’re a graduate or professional student, you can borrow up to $20,500-$40,500 a year in Stafford Loans.

To get a Stafford Loan, you must:
-Complete the Free Application for Federal Student Aid (FAFSA®) form
-Be enrolled at least half-time in an eligible degree or certificate program at an accredited school
-Be enrolled in a program that leads to a degree or certificate
-Be maintaining satisfactory academic progress in your course of study
-Not have defaulted on any federal student loans

What is the interest rate on a Stafford Loan?

Interest rates for Direct Stafford Loans first disbursed on or after July 1, 2020, and before July 1, 2021, are:

4.30% for unsubsidized and subsidized Direct Stafford Loans for undergraduate students
6.30% for unsubsidized and subsidized Direct Stafford Loans for graduate or professional students
7.60% for PLUS Loans for parents and graduate or professional students
An origination fee of up to 1.059% will be deducted from your loan disbursement.

How much money can I borrow with a Stafford Loan?

The amount you can borrow with a Stafford Loan depends on your year in school, whether you’re a dependent or an independent student, and other factors.

For the 2019-2020 school year, the maximum annual Stafford Loan amount for an independent undergraduate is $57,500. For a dependent undergraduate student, the maximum is $31,000.

The amount you actually receive will be less than the maximum because your school will deduct any financial aid you’re receiving that doesn’t have to be repaid.

When do I have to start paying back my Stafford Loan?

You will have to start paying back your Stafford Loan six months after you graduate, leave school, or drop below half-time enrollment.

What are the repayment options for a Stafford Loan?

There are four repayment plan options for Stafford Loans:

– Standard Repayment Plan: This is the plan with the shortest repayment period and the lowest total interest paid. Under this plan, you will have a fixed monthly payment for up to 10 years.
– Extended Repayment Plan: If you have more than $30,000 in outstanding Direct Loans, you may qualify for this plan. Your payments will be lower than they would be under the Standard Plan, but you will pay more interest over time because your repayment period will be up to 25 years.
– Graduated Repayment Plan: This plan is best for borrowers who expect their incomes to increase steadily over time. Your payments will start out low and then increase every two years, with the goal of having your loan repaid in 10 years. However, because your payments increase over time, you will ultimately pay more in interest than you would under the Standard Plan.
– Income Contingent Repayment Plan (ICR): This is the only income-driven repayment option available for Direct Stafford Loans. Your payment amount each month will be based on your annual income, family size, and outstanding Direct Loan balance, and will change each year as these factors change. The maximum repayment period under ICR is 25 years; however, any remaining balance on your loan may be forgiven after 25 years of qualifying payments if it has not already been repaid in full.

To learn more about these repayment options and to compare estimated monthly payments under each option, visit https://studentaid.gov/h/manage-loans/repayment-options

What are the consequences of defaulting on a Stafford Loan?

If you default on your Stafford Loan, you will lose your eligibility for deferment, forbearance, and repayment plans. You will also be ineligible for additional federal student aid. Defaulting on your loan also means:
-The entire unpaid balance of your loan and any interest you owe becomes immediately due and payable;
-You will lose eligibility for deferment, forbearance, and repayment plans;
-You are not eligible for additional federal student aid;
-The default will be reported to credit bureaus, damaging your credit rating;
-Your wage may be garnished (up to 15% of your disposable salary);
-Your tax refunds and federal benefits (such as Social Security) may be withheld;
-You may be sued;
-Your defaulted loan will likely cost more because of the late fees, additional interest, court costs, attorney’s fees, collection fees, and other costs associated with the debt.

How can I get more information about Stafford Loans?

If you’re considering taking out a Stafford Loan, you may want to get a Direct Stafford Loan Estimate. This estimate will give you an idea of how much money you can borrow and what the repayment terms may be.

To get a Direct Stafford Loan Estimate, contact the financial aid office at the school where you’re considering enrolling. The office will need some information from you before they can provide an estimate, such as your expected enrollment status (full-time or part-time) and whether you plan to attend school for a full academic year or just part of one.

Keep in mind that the Direct Stafford LoanEstimate is just that — an estimate. The actual loan amount and terms may vary depending on factors such as your final enrollment decision, your actual enrollment status, and the availability of funds.