Stafford Loan Interest Rate
Stafford Loans offer very competitive interest rates when compared to other private bank student loans. All Stafford Loans are part of the Direct Loan program administered through the Department of Education, which is a not-for-profit government agency. Students are able to take advantage of these favorable interest rates, since the government is not out to make a profit. Most large banks add a percentage to their student loan interest rates to increase their margins or their overall profitability.
The interest rate for all Unsubsidized Stafford Loans first disbursed on or after July 1, 2006 is fixed at 6.8 percent. The interest rate for Subsidized Stafford loans first disbursed on or after July 1, 2009 is fixed at 5.6 percent. If the first disbursement of your subsidized loan is between July 1, 2011 and June 30, 2012, the interest rate on your loan is fixed at 3.4%.
For Stafford Loans first disbursed between July 1, 1998 and June 30, 2006, the interest rate is variable (adjusted annually on July 1st) but will not exceed 8.25 percent. Students will be notified any time the variable rate changes. The interest rate for these loans in 2009-10 is 2.48 percent. (These rates apply to loans in repayment status; the rate may be lower during grace and deferment periods.)
This change from a variable to a fixed interest rate does not affect a borrower's variable interest rate on loans made before July 1, 2006.
Over a four-year period beginning July 1, 2008, the interest rate on subsidized Stafford Loans made to undergraduate students will be reduced. The applicable interest rates for loans made during this period are as follows:
First disbursement of a loan Interest rate on the unpaid balance
Made after and Made Before
July 1, 2009 - July 1, 2010 5.6 percent
July 1, 2010 - July 1, 2011 4.5 percent
July 1, 2011 - July 1, 2012 3.4 percent
These changes apply to subsidized Stafford loans first disbursed on or after July 1 of each year through June 30 of the next year. This change does not affect any prior loans made to borrowers; the terms and interest rates of those loans remain the same. These reduced interest rates apply only to subsidized loans; any unsubsidized Stafford Loan for the same undergraduate borrower would continue to be made at the current fixed interest rate of 6.8 percent.
There is a fee of up to 1.5 percent deducted proportionately from each loan disbursement of the loan for Stafford Loans that are first disbursed between July 1, 2009 and June 30, 2010. The entire fee goes to the government to help reduce the cost of the loans in the Direct Loan Program. Also, if you don't make your loan payments when scheduled, you may be charged collection costs and late fees.
Stafford loan Repayment | Stafford Loan Repayment Plan | Stafford Loan
After you graduate, leave school, or drop below half-time enrollment, you will have a six-month "grace period" before you begin repaying your Stafford Loan. During this period, you'll receive repayment information through the Department of Education 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).
All Stafford Loans are administered through the Department of Educationís Direct Loan Program, so repayment should be through the Direct Loan Servicing Center.
The Direct Loan program offers 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.
When it comes time to start repaying your student loan(s), you can select a repayment plan thats right for your financial situation. Generally, you'll have from 10 to 25 years to repay your loan, depending on the repayment plan. Below are the Repayment options available to students