Federal Subsidized Stafford Loan
The Higher Education Act (HEA) of 1965 (Part B, Title IV, Amended), created the guaranteed student loan programs. The Higher Education Amendments of 1992 reauthorized the HEA and renamed the guaranteed student loan programs the FFEL Program, which now comprises Federal Stafford Loans (formerly Guaranteed Student Loans) and Federal PLUS Loans. Student loans, unlike grants and work-study, are borrowed money that must be repaid.Student Eligibility
- You must be a U.S. citizen or eligible non-citizen
- Making Satisfactory Academic Progress
- Be enrolled at least half-time (6 hours)
- Completed the Free Application for Federal Student Aid (FAFSA) or the Federal Renewal; indicate that you are interested in student loans on the FAFSA, and have the school receive the results
The federal government will pay the interest on your loan during your in-school and grace periods.
The loan limits cannot exceed the cost of education. Maximum amounts under federal guidelines are:
Annual Limits: Aggregate Limits: • $3,500 Freshmen $23,000 Undergraduate Students • $4,500 Sophomores $65,000 Graduate Students- includes under-graduate loans • $5,500 Juniors and Seniors • $8,500 Graduate students
For new borrowers, the interest rate is 2.82%. This rate is variable and is adjusted on July 1. The interest rate will not exceed 8.25%. The interest rate for students receiving previous Federal Stafford Loans is the rate that is stated on the promissory note when the student received the loan - 7%, 8%, or 9%.
If the lender agrees to make the loan and the school receives the approval of the guarantee agency, the lender will send the loan amount to the school. As federal regulation dictate, loan proceeds for any loan period must be divided into two installments. The first will be received at the school and the beginning of the semester, with the second following at the term’s midpoint. GSU’s Office of Student Financial Aid participates in the Electronic Funds Transfer (EFT) Program. You may contact your lender or this office to determine if EFT is available for your loan disbursements.
Fees for Making a Subsidized Stafford Loan
You must pay an origination fee of 3 percent (3%) that will be deducted from each loan disbursement. The guarantee agency will also charge a 1 percent (1%) guarantee fee. This amount will also be deducted from the loan disbursement. For example, if the student’s certified loan amount is $1,313, the student will actually receive $1,260.48.
The processing time is usually 4 to 6 weeks after the school receives the student’s SAR results electronically. To be sure that the loan funds are available when needed, you should:
- Apply early. Avoid waiting until the last minute. Any required application/promissory notes should be submitted before the priority deadline of June 1, 2008.
- Be sure that all three copies of the application are completed before submitting to the school. Time lost in returning incomplete forms delays the processing of your application.
Loan repayment on the Subsidized Stafford Loan begins 6 months after you graduate, leave school, or drop below half-time status. The lender generally may allow you up to 10 years to repay the loan. You must contact your lender to arrange a repayment schedule if you leave school, graduate, or drop below half-time status.
Deferment - Under certain conditions you may defer your loan payments for up to 3 years while you are:
- A member of the U.S. Armed Forces or the Commissioned Corps of the U.S. Public Health Service
- A Peace Corps volunteer in ACTION programs such as VISTA
- An active duty member of the National Oceanic and Atmospheric Administration Corps
- A full-time teacher in a public or private elementary or secondary school in an area the Department of Education has determined to be a teacher shortage area
- Temporarily totally disabled, or if you cannot work because a dependent of yours is temporarily totally disabled and you must care for him or her (Must have a doctor’s certification)
You may defer repayment for up to 2 years while serving an eligible internship. You may defer repayment periods of unemployment totaling up to 2 years, if during those periods you are actively looking for a full-time job.
If you are a mother of preschool age children, you may defer repayment for up to 12 months if you are going work at a salary that is no more than $1.00 over the minimum wage. You may defer repayment for up to 6 months of parental leave.
DEFERMENTS ARE NOT AUTOMATIC. IF YOU BELIEVE THAT YOU ARE ELIGIBLE FOR A DEFERMENT, CONTACT YOUR LENDER.
Failure of the borrower to fulfill the agreement of the promissory note by not making installment payments when due or by not complying with other terms of the promissory note will result in the following actions:
- The guarantee agency or the federal government can sue you to collect the loan, and you may be required to repay the entire amount immediately.
- Credit Bureaus will be notified of your default, which may affect your future credit rating.
- The Internal Revenue Service may withhold your income tax refund and apply it toward your loan.
Your loan will be cancelled if you become totally and permanently disabled, or if you die. If you serve as an enlisted person in certain selected specialties of the U.S. Army, the Army Reserves or the Army National Guard, the Department of Defense will, as an enlistment incentive, repay a portion of your Stafford Loan.
The Higher Education Amendments of 1998 established a Teacher Service Forgiveness program for new Stafford Loan borrowers who did not have an outstanding balance on October 1, 1998. An eligible Stafford Loan borrower may not be in default and must be employed as a full-time teacher for 5 consecutive years in a school that qualifies for loan cancellation under the Perkins Loan Program. Under this program, secondary school teachers must be certified as teaching in a subject area relevant to their academic major; elementary teachers must be certified as having knowledge or teaching skills in reading, writing, mathematics, and other areas of the elementary curriculum. The amount to be forgiven cannot exceed $5,000 of the aggregate loan amount outstanding after completion of the borrower’s fifth year of teaching.