The average costs for a college education in the United States are a barrier for many students. They and their families lack sufficient resources to pay the full amount of costs, tuition, and expenses. In 2014, the Department of Education estimated average costs of one year of college at an accredited four-year school are $22,022.
Federally guaranteed student loans may be necessary to assist students wishing to attend two and four-year institutions. The Stafford Loan Program is a primary source of funds for college education; it brings the costs of college within reach of millions of U.S. families and students.
Loan Elements
The elements of the Stafford Loan Program are in Title IV of the Higher Education Act. It is the national federally guaranteed student loan program. First authorized in 1965, the Congress renamed the program in 1988 to honor the work of Senator Robert Stafford of Vermont. Senator Stafford was a leader in expanding financial aid to students. The program consists of both subsidized and unsubsidized loans to students.
Program criteria base subsidized loans on demonstrated financial need. In this loan category, the federal government pays the interest on the loan amounts for students enrolled in school and for any periods of loan deferment. Unsubsidized Stafford loans are different. Students are responsible for interest accrued during periods of their enrollment. While the government may defer interest payments on unsubsidized loans during the time the student remains enrolled, the program adds accrued interest amounts to the loan principal, and students must repay it as part of the principal due.
Students enrolled in an institution of higher learning which participates in the Federal loan program are eligible for Stafford loans. Eligibility for unsubsidized loans is independent of the need. The student loan program classifies students as dependent if they seek an undergraduate degree and if they receive substantial financial support from their families. Independent students, including all graduate students, are emancipated adults.
Loan Limits
The Department has established separate loan limits for dependent, independent, and graduate students. For dependent students, the first-year limit is $5,500; second year $6,500; and third or fourth years $7,500. The overall limit is $31,000. For independent and Graduate students, the annual limits are first year $9,500; second year $10,500; and third or fourth years $12,500. The Graduate limit is $20,500 per year up to an overall limit of $138,500. Students must apply for financial assistance as part of the college application process, and each participating institution sets deadlines for application. To apply for a Direct Loan, students must complete and submit the Free Application for Federal Student Aid.
Loan Forgiveness
There is a loan forgiveness program for Stafford loans up to $17,500. The forgiveness program encourages graduates to teach and maintain excellence in fields of teaching need, including science and mathematics. Based upon five consecutive years of teaching full-time, the highest forgiveness provision applies to outstanding teachers in areas of need.
