How much can I borrow with the FAFSA Federal student loan program?

It depends on your year in school and whether you have a subsidized or unsubsidized Direct or FFEL Stafford Loan. A subsidized loan is awarded on the basis of financial need. If you're eligible for a subsidized loan, the government will pay (subsidize) the interest on your loan while you're in school, for the first six months after you leave school, and if you qualify to have your payments deferred. Depending on your financial need, you may borrow subsidized money for an amount up to the annual loan borrowing limit for your level of study.

You might be able to borrow loan funds beyond your subsidized loan amount or even if you don't have demonstrated financial need. In that case, you'd receive an unsubsidized loan. Your school will subtract the total amount of your other financial aid from your cost of attendance to determine whether you’re eligible for an unsubsidized loan. Unlike a subsidized loan, you are responsible for the interest from the time the unsubsidized loan is disbursed until it is paid in full. You can choose to pay the interest or allow it to accrue (accumulate) and be capitalized (that is, added to the principal amount of your loan). Capitalizing the interest will increase the amount you have to repay.

You can receive a subsidized loan and an unsubsidized loan for the same enrollment period as long as you don't exceed the annual loan limits.

 

If you're a dependent undergraduate student, each year you can borrow up to

 

$2,625 if you're a first-year student enrolled in a program of study that is at least a full academic year.

$3,500 if you've completed your first year of study and the remainder of your program is at least a full academic year.

$5,500 if you've completed two years of study and the remainder of your program is at least a full academic year.

If you're an independent undergraduate student or a dependent student whose parents have applied for but were unable to get a PLUS Loan (a parent loan), each year you can borrow up to

 

$6,625 if you're a first-year student enrolled in a program of study that is at least a full academic year (no more than $2,625 of this amount may be in subsidized loans)

$7,500 if you've completed your first year of study and the remainder of your program is at least a full academic year (no more than $3,500 of this amount may be in subsidized loans)

$10,500 if you've completed two years of study and the remainder of your program is at least a full academic year (no more than $5,500 of this amount may be in subsidized loans)

These amounts are the maximum yearly amounts you can borrow in both subsidized and unsubsidized FFELs or Direct Loans, individually or in combination. Because you can't borrow more than your cost of attendance minus the amount of any Federal Pell Grant you're eligible for and minus any other financial aid you'll get, you may receive less than the annual maximum amounts.

 

How will I get the U.S. college loan money?

For both the Direct Loan and FFEL programs, you'll be paid through your school in at least two installments. No installment may exceed one-half of your loan amount. Your loan money must first be applied to pay for tuition and fees, room and board, and other school charges. If loan money remains, you'll receive the funds by check or in cash, unless you give the school written authorization to hold the funds until later in the enrollment period.

 

If you're a first-year undergraduate student and a first-time borrower, your school cannot disburse your first payment until 30 days after the first day of your enrollment period. This practice ensures you won't have a loan to repay if you don't begin classes or if you withdraw during the first 30 days of classe

What's the interest rate of federal college loans?

The interest rate is variable (adjusted annually on July 1st) but does not exceed 8.25 percent. You'll be notified any time the variable rate changes. For 2005-06, the interest rate for loans in repayment on or after July 1, 1998 was 5.3 percent (lower during grace and deferment periods).

 

 

Other than interest, is there a charge for this federal loan for university and college tuition?

You’ll pay a fee of up to 4 percent of the loan, deducted proportionately from each loan disbursement. For a FFEL Stafford Loan, a portion of this fee goes to the federal government, and a portion goes to the guaranty agency (the organization that administers the FFEL Program in your state) to help reduce the cost of the loans. For a Direct Stafford Loan, the entire fee goes to the government to help reduce the cost of the loans. Also, if you don’t make your loan payments when scheduled, you may be charged collection costs and late fees.

 

When do I pay back my Stafford Loans? 

After you graduate, leave school, or drop below half-time enrollment, you will have a six-month "grace period" before you begin repayment. During this period, you'll receive repayment information, and you'll be notified of your first payment due date. You're responsible for beginning repayment on time, even if you don't receive this information. Payments are usually due monthly.

 

During the grace period on a subsidized loan, you don’t have to pay any principal, and you won’t be charged interest. During the grace period on an unsubsidized loan, you don’t have to pay any principal, but you will be charged interest. You can either pay the interest or it will be capitalized (added to your principal loan balance, thus increasing the amount you’ll repay).

How do I pay back my federal college loans?

You’ll repay your FFEL Stafford Loan to a private lender or loan servicer. You’ll repay your Direct Loan to the U.S. Department of Education’s Direct Loan Servicing Center. Both the Direct Loan and FFEL programs offer four repayment plans you can choose from, but the terms differ slightly. You will receive more detailed information on your repayment options during entrance and exit counseling sessions your school will provide. To read more now about repayment plans under both programs, go to the Repaying section of this Web site.

 

What if I have trouble repaying my federal student loan?

Under certain circumstances, you can receive a deferment or forbearance on your loan, as long as it’s not in default. During a deferment, no payments are required. You won’t be charged interest for a subsidized FFEL or Direct Stafford loan. If you have an unsubsidized Stafford Loan, you are responsible for the interest during deferment.

 

If you’re temporarily unable to meet your repayment schedule (for example due to poor health or other unforeseen personal problems), but you’re not eligible for a deferment, your lender might grant you forbearance for a limited and specified period. For more information, go to the Repaying section of this Web site

Can my Stafford Loan ever be discharged (canceled)?

Yes, but only under a few circumstances. Your loan can’t be canceled because you didn’t complete the program of study at the school (unless you couldn’t complete the program for a valid reason—the school closed, for example), or because you didn’t like the school or the program of study, or you didn’t obtain employment after completing the program of study.

Federal student loans FAQs- Continued