Thing you should know about Loans
The Federal Stafford Loan enables students to borrow funds directly from a lending institution. The loan is insured by a guaranty agency and backed by the federal government. There are two types of Stafford Loans—Subsidized and Unsubsidized.
You must have "need" as determined by the Financial Aid Office. Interest is paid by the government while you are enrolled at least half-time, during the six month grace period, and during any deferment period while you are in repayment. Principal payments are postponed.
"Need" is not required. You are responsible for paying the interest while you are enrolled at least half-time, during the grace period and during deferment periods. Principal payments are postponed during those periods. If you prefer, you can "capitalize" the interest payments, which means the accrued interest is added to the principal and increases the amount that you owe.
The interest rate varies, but is capped at 8.25%. It is based on the 91 day Treasury Bill plus 2.5% while you are enrolled at least half-time, during the grace period and during deferment periods. During repayment, interest is based on the 91 day Treasury Bill plus 3.1%. It is set annually for the period of July 1 to June 30.
You pay a 3% origination fee to the government and up to 1% insurance fee to the guaranty agency. Both fees are used to cover administrative costs for the program, and are deducted from you loan amount and paid on your behalf by your lender prior to disbursement. The fees are subject to change.
Repayment begins following a six month grace period after you graduate, withdraw from school or drop below half-time enrollment. You may take up to ten years to repay your loan. The minimum monthly payment is $50. You may repay your loan at any time without penalty. Level and graduated payment plans, deferments and forbearances are possible repayment options.
If this is the first time you have taken out a loan, you will be required to attend class for 30 days before receiving your first disbursement.
Your loan must be distributed in multiple disbursements. Generally, this means you will receive equal portions of your loan each semester, except if your loan is only one semester in length. If one semester , then generally the loan will be split into 2 disbursements in that semester.
You must be enrolled in the proper number of credits before a check will be disbursed. You must maintain at least half-time enrollment (a minimum of 6 credits) throughout the loan period to receive the funds. You should be aware that if you enroll in fewer credits than you originally planned, your loan eligibility may be reduced. You also must maintain satisfactory progress toward your degree.
As long as you continue to enroll at least half time, you qualify to postpone payment on the loan principal. You need to process a deferment form if you do not continue to borrow in future years to verify for your lender that you are still enrolled. Contact you lender directly for a deferment form, as needed.
Terms to Know
Accrued Interest: Interest that accrues on the unpaid balance of your loan principal
Capitalization: The addition of unpaid interest to the principal of your loan which increases your total debt.
Default: Failure to repay your loan.
Deferment: A period when your loan payments are suspended if you meet certain criteria.
Delinquency: Failure to make payments when due.
Forbearance: Temporary adjustment to repayment schedule in cases of financial hardship
Grace Period: The time after you leave school or drop below half-time when payment on the principal is not required.
Interest: The cost you pay to borrow money.
Lender: Federal Government
Principle: The amount you borrow on which you pay interest.
Servicer: Institution that administers and collects your loan, either the holder of your loan or an agent acting on behalf of the holder.
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