Financial Resource Center


Stafford Loan Info for the 2011-2012 Academic Year

by Ken O'Connor / September 22nd, 2011

Before applying for any additional private student loans, college students should first file their FAFSA to confirm eligibility for the Federal Stafford loan. The Federal Stafford loan program is used to offer students low-cost, guaranteed financial assistance for college. Even though they are still loans that must be paid back with any accumulated interest, they offer favorable terms and do not require a co-signer to get approved. There are two kinds of Stafford loans available:
  • The subsidized Stafford loan: The government pays the interest on this loan on behalf of the student while the student maintains half-time registration or greater in a degree-seeking school program. The loan is awarded to the student after reviewing the student's FAFSA information and cost of attendance as established by the school's financial aid office. Financial need determines eligibility.
  • The unsubsidized Stafford loan: This loan will accrue interest normally after the funding disburses to the student account. Unlike the subsidized Stafford loan, this interest will accumulate and will be included as part of loan repayment after the student completes or leaves school. This loan offers a guaranteed fixed interest rate with approval without a co-signer required.
2011-2012 Stafford loan rates:
  • The subsidized Stafford loan rate is at 3.4%.
  • The unsubsidized Stafford loan rate is 6.8%.
Yearly Stafford loan amounts for dependent undergraduate students:
  • First-year freshman: $5,500 ($3,500 subsidized/$2,000 unsubsidized)
  • Second-year sophomore: $6,500 ($4,500 subsidized/$2,000 unsubsidized)
  • Juniors, seniors, and super seniors: $7,500 ($5,500 subsidized/$2,000 unsubsidized)
Yearly Stafford loan amounts for independent students and graduate-level students:
  • First-year freshman: $9,500 ($3,500 subsidized/$6,000 unsubsidized)
  • Second-year sophomore: $10,500 ($4,500 subsidized/$6,000 unsubsidized)
  • Juniors, seniors, and super seniors: $12,500 ($5,500 subsidized/$7,000 unsubsidized)
  • Graduate or professional: $20,500 ($8,500 subsidized/$12,000 unsubsidized)
How does the financial aid office determine eligibility? The financial aid office will award you with a subsidized or unsubsidized Stafford loan considering the following equation to calculate financial need:
School cost of attendance – Expected Family Contribution – All other financial aid awarded = Unmet need
If a student is determined to have financial need, a subsidized Stafford loan is awarded to meet that need, or fulfill the maximum amount of subsidized loan eligibility the student has. Let's use an example for an undergraduate dependent student who is eligible for the subsidized Stafford loan:
  • School cost of attendance or COA = $31,500
  • Expected Family Contribution or EFC = $3,500
  • Total financial aid awarded = $22,000
$31,500 – $3,500 – $22,000 = Unmet need of $6,000
The student can receive the maximum amount of subsidized Stafford loans to meet their grade level allotment. For a freshman, it's $3,500. A sophomore would get $4,500 and a junior or senior would receive $5,500. Here is an example of a student who is partially eligible:
  • School COA = $20,500
  • EFC = $8,500
  • Financial aid awarded = $10,000
$20,500 – $8,500 – $10,000 = Unmet need of $2,000
No matter if he or she is a freshman, sophomore, junior, or senior, the student may only receive $2,000 in subsidized Stafford loans to cover unmet need. The remaining Stafford loan eligibility is put into the unsubsidized variety. Here is a student who is not eligible for subsidized Stafford loans, but will instead receive unsubsidized Stafford loans:
  • COA = $26,000
  • EFC = $21,000
  • Financial aid awarded = $7,000
$26,000 – $21,0000 – $7,000 = No unmet need
Student will receive unsubsidized Stafford loans up to his or her yearly grade level amount.
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Ken O'Connor is a financial aid expert and the director of student advocacy at Learn more about credit union private student loans and college planning by visiting his blog.
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