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Repaying Stafford Loans

The Stafford Student Loan Program includes the Federal Family Education Loan (FFEL) Program and the William D. Ford Federal Direct Loan (Direct Loan) Program. Successful repayment of your Stafford Loan starts with understanding your options.

Types of Stafford Loans
Stafford Loans can be subsidized or unsubsidized, and the type of loan you have dictates your repayment options. If your loan is subsidized, the government pays the interest while you are in school and during your six-month grace period. If your loan is unsubsidized, you must either pay the interest while you are in school or allow it to accrue and be capitalized (added to your loan principle). As of July 1, 2006, the interest rate for all Stafford Loans is fixed at 6.8%.

Repayment Plans
The following Stafford Loan repayment options should be explained to you during your exit counseling:

  • Standard. With this plan, the minimum monthly repayment amount is $50 and the repayment period is 10 years.
  • Graduated. The amount of the payments gradually increases over time. Typically, the repayment period is also 10 years.
  • Income sensitive. The amount of the monthly payments for this plan is based on both the loan amount and your yearly income.
  • Extended. If you owe over $30,000, this plan allows you to extend your repayment period to up to 25 years.

Financial Difficulties
If you have trouble making your loan payments, contact your lender rather than default on your loans. With a Stafford Loan, you might be eligible for a deferment or forbearance to temporarily postpone or reduce your payments. It's also possible to have part of your loan cancelled if you work as a teacher in an underserved area.

Prioritizing Your Loan Payments
If you have other debt in addition to your Stafford Loan, it's important to prioritize your payments. In most cases, you'll want to pay off the debts with the highest interest rates as quickly as you can. By making more than the minimum payment each month, you can pay off high interest debt quicker, which saves you more money in the long run. If you have more than one type of student loan with different interest rates, you may want to find out if you are eligible for a consolidation loan. Remember that the sooner you repay your debts, the more money you'll generally be able to save on interest charges.