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From Wikipedia, the
free encyclopedia A Stafford Loan
is a student loan offered to eligible students enrolled in accredited
American institutions of higher education to help finance their education.
The terms of the loans are described in Title IV of the Higher Education Act
of 1965 (with subsequent amendments), which guarantees repayment to the
lender if a student defaults.
In 1988, Congress renamed the Federal Guaranteed Student Loan program the
Robert T. Stafford Student Loan program, in honor of U.S. Senator Robert
Stafford, a Republican from Vermont, for his work on higher education.[1]
Because the loans are guaranteed by the full faith of the US Government,
they are offered at a lower interest rate than the borrower would otherwise
be able to get for a private loan. On the other hand, there are strict
eligibility requirements and borrowing limits on Stafford Loans.
Students applying for a Stafford Loan or other federal financial aid must
first complete a FAFSA. Stafford Loans are available to students either
directly from the United States Department of Education through the Federal
Direct Student Loan Program (FDSLP, also known as Direct) or from a
financial intermediary (such as Chase, Sallie Mae or Student Loan Corp.)
through the Federal Family Education Loan Program (FFELP).
No payments are expected on the loan while the student is enrolled as a full
or half time student. This is referred to as in-school deferment. Deferment
of repayment continues for six months after the student leaves school either
by graduating, dropping below half-time enrollment, or withdrawing. This is
referred to as the Grace Period.
Stafford Loans are available both as subsidized and unsubsidized loans.
Subsidized loans are offered to students based on demonstrated financial
need. The interest on Subsidized loans is paid by the federal government
while the student is in school, during the grace period, and during
authorized deferment. For unsubsidized Stafford Loans, students are
responsible for all of the interest that accrues while the student is
enrolled in school. The interest may be deferred throughout enrollment.
Unpaid interest that is deferred until after graduation is capitalized
(added to the loan principal).
Interest on Stafford Loans may vary and are determined based upon the date
the loan was disbursed.
Calculations to determine undergraduate Stafford Loan rates
Stafford Loan Disbursement Date Rate Type Subsidized Interest Rate
Unsubsidized Interest Rate Current Rate (2009-2010)
Prior to July 1, 1998 Variable 91-Day T-Bill + 3.1% 91-Day T-Bill + 3.1%
3.28%
July 1, 1998 to June 30, 2006 Variable 91-Day T-Bill + 2.3% 91-Day T-Bill +
2.3% 2.48%
July 1, 2006 to June 30, 2008 Fixed 6.8% 6.8% 6.8%
July 1, 2008 to June 30, 2009 Fixed 6.0% 6.8% 6.8%
July 1, 2009 to June 30, 2010 Fixed 5.6% 6.8% 6.8%
July 1, 2010 to June 30, 2011 Fixed 4.5% 6.8% 6.8%
July 1, 2011 to June 30, 2012 Fixed 3.4% 6.8% 6.8%
July 1, 2012 to June 30, 2013 Fixed 6.8% 6.8% 6.8%
SOURCE: Stafford Loan Interest Rates [1]
SOURCE: The Relationship between Treasury Bills and Education Loans [2]
For variable rate loans, the rates are set annually using the price of the
91-day Treasury bill on the last Monday of May, and become effective for the
following year on July 1. For fiscal year 2008-2009 the 91-day Treasury bill
auctioned on May 27, 2008 at 1.905% (rounded to 1.91%) are used for the
calculation.[2] On May 26th, 2009 the 91-day Treasury bill was auctioned at
an investment rate of 0.178%[3] . On July 1, 2009, the base rate for
variable rate Stafford Loans were adjusted to 0.18%. Loans issued prior to
July 1, 1998 were adjusted to a rate of 3.28%. Loans issued July 1, 1998
thru June 30th, 2006 were adjusted to a rate of 2.48%.
As of July 1, 2006 all Stafford Loans are issued with a fixed interest rate.
For Direct loans and most loan providers, the rate is currently set at
6.80%.
As the new rate goes into effect, some loan providers are foregoing portions
of the margin they are entitled to under the Federal program, offering
interest rates lower than the standard rate. Many are also offering price
incentives related to payment history, direct debit, etc. Collectively,
interest rate reductions, principal reductions, and origination fee
discounts are known as Borrower Benefits.
In addition, in repealing the Single Holder Rule, Congress also allows loan
providers to compete for college consolidation loans that are available to
students and former students with multiple loans. Specialized consolidation
lenders and student loan providers compete on various incentives to attract
customers.
[edit] Stafford Loan lenders
Top Stafford lenders ranked by total FY 2006 loan originations
Lender name # of loans Amt of loans ($)
Federal Direct Student Loan Program 2,619,598 $10,900,128,053
Sallie Mae 1,602,733 $6,140,928,699
JP Morgan Chase 994,588 $3,689,467,923
Citibank 887,102 $3,662,792,417
Bank of America 696,613 $2,730,933,359
Wells Fargo EFS 613,808 $2,563,877,315
Wachovia Education 616,175 $2,468,840,370
College Loan Corporation 338,932 $1,365,537,574
U.S. Bank 316,005 $1,110,444,590
Access Group 111,130 $996,504,454
Edamerica 223,173 $837,074,415
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