Stafford Loan Frequently Asked Questions

I completed my MPN, what's next?

Once you have signed your Master Promissory Note, we reach out to your school to request certification. The school will then certify the loan for the dollar amount that you were awarded.

How long does it take to get my funds?

It all depends on what date your school sets the disbursement for. Check with your financial aid officer for more information.

Can you tell me what my balance is on my Stafford loan?

If you are wondering how much you owe in Federal Stafford Loans, please call the US Department of Education at 800-433-3243 or you may look up your student loans on the National Student Loan Database. Visit www.NSLDS.ed.gov.

How much am I eligible for?

To see the loan limits chart for undergraduates, please click here. If you are a graduate student, please click here.

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Why does the loan need to be certified?

Can't I just give you a copy of my award letter? Certification is necessary as it usually happens closer to the semester start date so that the financial officer can verify that you are actually enrolled. Unfortunately, an award letter cannot be used; all schools and Stafford loan lenders use the certification process.

What is the interest rate for Stafford Loans?

For the 2007-08 school year, the interest rate on a new Stafford Loan is fixed at 6.8%. As of July 2006, all new Federal Stafford Loans will have fixed interest rates. Please note, that interest rates on Federal Stafford Subsidized and Unsubsidized Loans change yearly but will never exceed 8.25%.

What can I use a Stafford Loan for?

Stafford Loans can be used towards the total cost of education - tuition, room and board, books, and other education-related expenses.

Where can I use a Stafford Loan?

Stafford Loans can be used at any school that accepts them. Take a look at which student loans are accepted at which schools by search our directory of student loans by school.

What are the deadlines for Stafford Loans?

Unfortunately, there is no single set deadline for Stafford Loan applications; you will need to contact your school's financial aid office to obtain deadlines for your specific institution.

The amount of my student disbursements was less than I was awarded by the school. Why?

Lenders are allowed to retain a percentage of the amount you borrow in "guarantee fees" and/or "origination fees". Guarantee fees are used by the lender in creating a reserve to protect the loan program in instances when borrowers default on their loans. Origination fees are a processing fee retained by lenders.

The Department of Education determines the maximum percentage for guarantee and origination fees for Federal Stafford, PLUS and Direct loans. The maximum origination fee in these programs is 3%, the maximum guarantee fee is 1%. Lenders and guarantee agencies are not required to charge this fee, and some have recently have developed 0% guarantee fee programs.

For alternative loans programs, there is generally no maximum fee rate. Fees for alternative loans can range from 0% to 10% or more depending on the credit worthiness of the borrower and risk associated with the loan.

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My son's girlfriend is 19 and her Mother moved out of state and provides no financial support. How can she get the financial help she needs to continue her education?

A couple of solutions:

[1] For people with no parental support, the PLUS loan is still an option because PLUS loans can have any creditworthy adult as the borrower. Obviously, the borrower should have a strong relationship to the student, since the loan is in the borrower's name. PLUS loans are NOT parent-only.

[2] Alternative student loans are another good choice, especially for students who have been turned down for federal aid. A cosigner is strongly recommended, but the advantage of the alternative student loan is that the loan is principally in the student's name.

I am just graduating London Business School (MBA) this July. I am an US citizen and have some student loans from HSBC Bank in England. I would like to get a US student loan to refinance some of my student debt. How do I go about doing this and what do I apply for?

Because the loan is through an international bank, there's no way to apply federal student aid directly to it - it's seen as a private debt, essentially. The only option is an alternative student loan, which does not require school certification as long as you're enrolled in a TERI-approved school. Get the alternative student loan if you can, and use it to pay off the international loan.

Over 4 years, 8 semesters, how many loans and loan payments will we have, not considering any consolidations?

4 - 8, depending on whether you receive subsidized or unsubsidized or a combination of both.

Our schedule shows a Stafford loan amount available to us each semester. If we have resources to pay tuition and do not need to access any Stafford loans for that particular semester, can we skip a semester of borrowing the Stafford loan?

You can't skip a semester, but you can skip a year. If you receive funds and you don't need them, call your lender and arrange for a payment back to the lender.

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The loan is deferred until graduation; can we pay on the loan during the 4 years?

Yes, but you will need to place your loan into repayment and then defer it while in school.

Are there penalties for early payment, or if the loan is paid in full before scheduled (deferred) payments begin?

There are never early payment penalties for federal student loans.

I was wondering if I had to apply for a loan every year after I used the money or does it replenish every year?

A very common question. You have to apply every year because each year, the amount of aid you are eligible for is determined by your FAFSA. Federal student loans do not "renew" automatically.

I will be entering law school in the fall but I have not decided which school (I am still waitlisted at 2 possibilities.) I know that I have been approved for an $18,500/year Stafford Loan, but I can't sign the promissory note until I know which school I'll be attending. I am worried about the loan being dispersed in time to pay my tuition. How soon after I sign my MPN will the loan money be dispersed to the school?

Stafford Loans are disbursed by the school, so it's up to the individual school to decide when funding is released. Check with the school financial aid offices for disbursement dates. If the bills are already due and the loan isn't available, an alternative student loan is a good option to bridge the gap.

I am currently in the grace period for loan repayment. I intend to take classes again this fall. I am writing to inquire whether you can direct me to online courses which accept Stafford Loans. Thank you very much for your time and help.

Online courses offered through an accredited Title IV school may be eligible; check with the school's financial aid office. Also be sure to apply for a continuing education loan as these loans are tailored towards online courses.

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Hi, I am at the final steps of obtaining the Federal Stafford Subsidized loan , but is currently very concern over a deduction in my financial aid. I was offered by my college an amount of 2,625 dollars for the Stafford loan. However, on my bill the amount has been reduced to 2546.24 dollars. I contacted my school and they explained that it was some fee that took 3% off of my aid , but they did not clarify what this fee was for. Could you please clarify to me exactly what this fee is for. Also , when I repay this loan will I have to fully repay the original amount or the reduced amount? Please respond soon as I do not have much time left.

The 3% fee is the guarantor fee charged by the lender to you for the loan. It is a fee paid to the lender to secure the loan. When you repay the loan, you are responsible for the full amount, the $2,625.

How is my EFC Calculated?

The federal government proscribes an official federal EFC calculation. This calculation determines family resources available from a family's income (less allowances for taxes and living expenses) and assets (less allowances for retirement). A percentage of these available amounts are earmarked as EFC. You can calculate an unofficial EFC right on the Internet. Click Here.

Why do some schools use an EFC that differs from what my Federal EFC (on my SAR) says?

Some schools use an Institutional EFC calculation to determine eligibility for non-Federal sources of financial aid. This calculation usually considers additional family resources, like home equity, that are not part of the Federal EFC calculation. Click here to learn all about the financial aid award process.

Can I get a Stafford Loan if I have bad credit/declared bankruptcy/have late payments on credit cards?

Yes. The Stafford Loan is not a credit-based loan - it is a need-based loan and your eligibility for it is governed by your FAFSA submission, not your credit report.

How do I manage the difference between the school's cost and the amount of financial aid I was awarded?

There are three main options available to students and families:

• Contributions from Savings -- a family might consider using savings or investments to meet educational costs. Families with assets that can be liquidated for educational expenses generally have less reliance on financial aid and pay less in fees and interest expenses
• Contributions from Income -- some families might be able to meet educational expenses by allocating funds from their current budget. This options requires a family to closely analyze their income and expenses and determine an amount that they can pay on an ongoing basis. Adjustments may have to be made to existing household expenses to afford an amount to allocate from Income.
• Contributions from alternative student loans -- some families must consider alternative loans as a means to meet educational costs. While these options typically require the lowest monthly payments, but also require the student and family to pay interest and/or finance charges in addition to the amount borrowed.

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What should I do if my family circumstances changed since submitting my financial aid applications?

Financial aid officers have some latitude in determining what data is used to calculate a family's EFC. You should contact your school's financial aid office with any circumstance that affect your family's income or expenses.

If you are able to document such circumstances (for example the unemployment of a family member or medical expenses that the family has incurred), the financial aid officer might be able to incorporate these circumstances and recalculate your EFC.

After accounting for all of the financial aid that does not require repayment, like grants and scholarships, how should I prioritize the various educational financing options that are available?

The good news is there are many options. You should first consider options that require the least amount of interest, finance or other charges. At the same time, you relate the amount of these options to your financial circumstances and understand that the options with lower/lowest charges often have more demanding payment schedules.

Generally speaking, prioritize based on total cost, repayment options, and flexibility. We believe the following order makes the most sense for 95% of the students:

1. Free Scholarship search
2. Low interest Stafford Loans
3. PLUS Loans for parents of undergraduate students
4. Alternative student loans when federal aid is not enough
5. Consumer debt such as credit cards

Which student loan programs are best?

While there are no absolute ways to determine which loan programs are best, there are some general guidelines and areas that will help to help you choose the most affordable loan option.

• Interest Subsidy -- Subsidized loans (in which the government or other agency) are far better than unsubsidized loans (in which interest must be paid by the borrower from the loan's disbursement).
• Lowest Cost -- The loan's interest rates and fee structure determine the amount of a loan's finance charges. Some loans (like mortgages) allow you to pay up-front fees in exchange for a lower interest rate. You should consider this feature in relation to how long you plan to repay the loan. The loans with a longer repayment period are often less expensive with lower interest charges and a slightly higher up-front fee.
• Interest rate options -- Programs offer different interest rate options. Some are fixed and stay the same over the life of the loan. Some are variable and tied to the Prime interest rate (or other index). When the interest rate changes also varies among programs. Some change annually, some quarterly and some as often as monthly.
• Flexibility -- Consider the repayment options offered. Are payments required during repayment? Can the principal be deferred? Are alternative repayment programs (graduate repayment or income sensitive, for example) offered?

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How do I choose a College?

While a very broad question, there is some basic information that you can consider and many Internet resources that can help you.

You should obviously consider each college's academic offerings. Are the programs broad enough (if you do not have a major in mind) or focused enough (if you have a major in mind)? Is the college accredited? What is the graduation rate for students at the school? Does a particular school offer the program you're interested in studying.

Are you interested in a large or small institution. Large institutions may offer less personal interaction with professors or a higher student to faculty ratio. Smaller schools may offer a more intimate academic setting and more personalized services.

Are you interested in on-campus living or will you commute. This will obviously determine if you look for schools nationally, or close to home.

Is cost and financial aid a factor? If so use the Internet to learn about the college's cost and information about the financial aid process and applications the school requires. Most schools also provide averages and statistics about financial aid awards made to students.

Do you require special services? The links and searches below will help you identify the specific offerings of schools.

You should also consider the student life issues of the schools you research and relate those offerings to your interests. Are you interested in an active, vibrant social life? Or are you interested in a more academically focused environment.

College Selection Resources:

You can use these links to find more information about schools.

• Edvisors Education Directory
• Petersons
• US News
• The College Board

How to choose an alternative loan program?

There are many ways to compare alternative loan programs. And oftentimes, a student's and family's unique circumstances will determine what loan program makes the most sense. Alternative loan programs differ in who the borrower is (the student, parent or other co-applicant). You should refer to the page on Alternative Loans for more information.

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