To be eligible for a subsidized Stafford loan, a student must demonstrate financial need. Two-thirds of subsidized Stafford loans are awarded to students whose families have an adjusted gross income of less than $50,000, however students from families with a higher income are still eligible. If you are a student and want to be considered for subsidized aid, and various other forms of aid, you need to fill out the Free Application for Federal Student Aid (FAFSA) form. Schools use the information on your FAFSA to decided how much aid you will receive for that school year. You may file your FAFSA online or fill out a paper form. You can access a PDF of the paper form online and print it, or you can call the Federal Student Aid Information Center at 1-800-433-3243 to request that a paper form be mailed to you. Hearing impaired TTY users can call 1-800-730-8913. Many students take out subsidized and unsubsidized loans – which require a student to pay all the interest on the loan -- in order to get the maximum amount of aid per year. By filling out the FAFSA, you are applying for both types of loans and grants, which are monies a student doesn’t have to pay back. If you are interested in receiving money from a private loan, you will need to fill out a separate application from the financial institution that is lending you the money.
The maximum amount you can borrow from a subsidized loan depends on your year in school, along with numerous other factors, and ultimately your school decides how much you need and can borrow each year. There is a maximum amount of subsidized aid a student can receive each year and a limit on the total amount of subsidized loans a student can receive over the course of his or her education. A first-year, undergraduate student can borrow a maximum of $3,500 in Subsidized Direct Stafford Loans. In the second year, a student can borrow a maximum of $4,500, and in the third year of school and beyond a student can borrow no more than $5,500. For graduate and professional degree students, the maximum amount a student can receive in a Subsidized Direct Stafford Loan is $8,500. Undergraduate students are allowed no more than $23,000 in Subsidized Stafford Loans and graduate students max out at $65,000 over the course of their enrollment.
After you’ve filed your FAFSA, you will receive your award letter, which details the amount of financial aid you’re eligible for that school year, including your Stafford loan amount. First-time Stafford loan recipients have to complete a master promissory note -- a legal document in which you promise to repay your loan and any interest. The note also details the terms of the loan. In most cases, you will only need to sign one master promissory note even if you receive aid in subsequent years. Your school will give you a copy of the note or offer you the option of completing the note online. Once your note is processed, you will receive your loan money through your school in at least two payments. Your school will use your money to pay your tuition and fees, room and board, and other expenses. If there is any money left, you will receive the excess amount in a check or other form of payment. You may also authorize your school to hold extra funds and apply them to a later enrollment period. Please note that freshman undergraduates and first-time borrowers will not receive their first payment until 30 days after the first day of the student’s enrollment period.
After you graduate, leave school or drop below half-time enrollment, you are given a six-month grace period before you have to begin repaying your subsidized loan. You will receive repayment information from your loan servicer -- the company that handles your loan and the entity that you repay your loan to – and you’ll be notified when your first payment is due. There are several repayment plans that give you between 10 to 25 years to repay your loan, but most options require a monthly payment. If you have trouble paying your loan, there are certain situations where you can receive a deferment or forbearance to temporarily stop or lower your loan payments.