| Student loans in the U.S. |
| Regulatory framework |
|---|
| Higher Education Act of 1965 US Dept of Education FAFSA Cost of attendance |
| Distribution channels |
| Federal Direct Student Loan Program FFELP |
| Loan products |
| Perkins · Stafford PLUS · Consolidation Loans |
A Stafford Loan is a student loan offered to eligible students enrolled in accredited American institutions of higher education to help finance their education. While included in the term " Financial aid " higher education loans differ from Scholarships and grants in that they must be paid back The Higher Education Act of 1965 (Pub L No 89-329 (the "HSA" was legislation signed into United States law on November 8, 1965 as part of The United States Department of Education (also referred to as ED, for Education Department is a Cabinet -level department of the United States The Free Application for Federal Student Aid (known as the FAFSA) is a form that can be filled out annually by current and anticipating University students (both In education finance in the United States the cost of attendance is the estimated full and reasonable cost of completing a full year as a full-time student The William D Ford Federal Direct Loan Program (FDLP, often referred to as "Direct Loans" is a United States Department of Education program that provides loans The Federal Family Education Loan Program (FFELP is a United States Department of Education program that provides for private organizations to market originate and service A Federal Perkins Loan, or Perkins Loan, is a need-based Student loan offered by the U A PLUS Loan is a Student loan offered to parents of students enrolled at least half time in eligible programs at participating and eligible post-secondary institutions In the United States both the Federal Family Education Loan Program (FFELP and the Federal Direct Student Loan Program (FDLP include consolidation loans that allow students Private Student Loans A private student loan is a financing option for Higher education in the United States that can either supplement or replace federally Student loans are loans offered to students to assist in payment of the costs of professional Education. The United States of America —commonly referred to as the College ( Latin collegium) is a term most often used today to denote an Educational Institution. Higher education is Education that is provided by universities, vocational universities, Community colleges Liberal arts colleges 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. The Higher Education Act of 1965 (Pub L No 89-329 (the "HSA" was legislation signed into United States law on November 8, 1965 as part of
In 1988, Congress renamed the Federal Guaranteed Student Loan program the Robert T. Stafford Student Loan program, in honor of Senator Robert Stafford of Vermont, for his work on higher education. The United States Senate is the Upper house of the bicameral United States Congress, the Lower house being the House of Representatives Robert Theodore Stafford ( August 8, 1913 – December 23, 2006) was an American Politician from Vermont. [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. The Free Application for Federal Student Aid (known as the FAFSA) is a form that can be filled out annually by current and anticipating University students (both 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. The United States Department of Education (also referred to as ED, for Education Department is a Cabinet -level department of the United States The William D Ford Federal Direct Loan Program (FDLP, often referred to as "Direct Loans" is a United States Department of Education program that provides loans ) through the Federal Family Education Loan Program (FFELP). The Federal Family Education Loan Program (FFELP is a United States Department of Education program that provides for private organizations to market originate and service
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. In Economics, a subsidy (also known as a subvention is a form of financial assistance paid to a business or economic sector 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. Interest is a fee paid on borrowed capital Assets lent include Money, Shares, Consumer goods through Hire purchase, major assets
Calculations to determine Stafford loan rates
| Stafford Loan Disbursement Date | Rate Type | Subsidized Interest Rate | Unsubsidized Interest Rate | Current Rate (2007-2008) | Future Rate (2008-2009) |
|---|---|---|---|---|---|
| Prior to July 1, 1998 | Variable | 91-Day T-Bill + 3. 1% | 91-Day T-Bill + 3. 1% | 8. 02% | 5. 01% |
| July 1, 1998 to June 30, 2006 | Variable | 91-Day T-Bill + 2. 3% | 91-Day T-Bill + 2. 3% | 7. 22% | 4. 21% |
| 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. Treasury securities are Government bonds issued by the United States Department of the Treasury through the Bureau of the Public Debt. For fiscal year 2007-2008 the 91-day Treasury bill auctioned on May 29, 2007 at 4. Treasury securities are Government bonds issued by the United States Department of the Treasury through the Bureau of the Public Debt. 919% (rounded to 4. 92%) are used for the calculation. [2] On May 27th, 2008 the 91-day Treasury bill was auctioned at an investment rate of 1. Treasury securities are Government bonds issued by the United States Department of the Treasury through the Bureau of the Public Debt. 905%[3] . On July 1, 2008, the base rate for variable rate Stafford loans will be adjusted to 1. 91%. Loans issued prior to July 1st, 1998 will be adjusted to a rate of 5. 01%. Loans issued July 1st, 1998 thru June 30th, 2006 will be adjusted to a rate of 4. 21%.
As of July 1, 2006 all Stafford loans are issued with a fixed interest rate. A fixed interest rate loan is a Loan where the Interest rate doesn't fluctuate during the fixed rate period of the loan 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. In the United States both the Federal Family Education Loan Program (FFELP and the Federal Direct Student Loan Program (FDLP include consolidation loans that allow students Specialized consolidation lenders and student loan providers compete on various incentives to attract customers.
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 |
SOURCE: Stafford (FFEL & Direct) and PLUS (FFEL & Direct) Loans, from the National Student Loan Data System (NSLDS), US Department of Education, Fiscal Year 2006. The William D Ford Federal Direct Loan Program (FDLP, often referred to as "Direct Loans" is a United States Department of Education program that provides loans SLM Corporation, commonly known as Sallie Mae, is the United States ' largest college student loan company managing more than $126 JPMorgan Chase & Co ( is the largest Banking institution in the United States by deposits and market capitalization and is one of the oldest operating Citibank is a major international Bank, founded in 1812 as the City Bank of New York, later First National City Bank of New York. Banc of America Securities Bank of America () is the largest bank by asset and second largest commercial Bank by deposits and Market capitalization in United Wells Fargo & Co ( is a diversified Financial services company headquartered in San Francisco California, United States with operations around the Wachovia Corporation ( based in Charlotte North Carolina, is a diversified Financial services holding company provided via its operating subsidiaries a broad US Bancorp ( is a Financial services Holding company, headquartered in Minneapolis, Minnesota. Access Group is a nonprofit student loan provider that specializes in graduate and professional student loans [3]
References
External links
- U.S. Dept. of Education: Stafford Loans (FFELs and Direct Loans)
- U.S. Dept. of Education: How to Choose and Evaluate Lenders
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