Student Loans

Stafford Loan

The Stafford Loan program makes low-interest loans available to students to help pay their education costs.  If your college judges you to have financial need, you may qualify for the subsidized Stafford Loan.  The federal government subsidizes your loan by not charging any interest on it until six months after you graduate, leave college, or fall below half-time attendance.

More often, students qualify for an unsubsidized Stafford Loan.  This means you'll be charged interest from the moment you take out the loan.  You can pay interest while you're in school or you can defer interest payments until after graduation.  If you put it off, your interest will be capitalized as part of the loan's principal.  You'll pay interest on interest.

How much can you borrow through the Stafford Loan program?  It depends on your status and whether you qualify for a subsidized and/or unsubsidized loan (see chart below).  The interest rate for Stafford loans first disbursed on or after July 1, 2006 is fixed at 6.8%. The variable interest rate for Stafford loans first disbursed on or after July 1, 1998 & prior to July 1, 2006 is 6.62% during in-school, grace, or deferment status during the period of July 1, 2007 through June 30, 2008. The variable interest rate for Stafford loans first disbursed on or after July 1, 1998 and prior to July 1, 2006 is 7.22% if the loans are in repayment or forbearance status during the period of July 1, 2007 through June 30, 2008.

Stafford Loan Chart

If you're taking out a subsidized Stafford Loan or are a dependent student (meaning you're considered a dependent on your parents' tax return) taking out an unsubsidized Stafford Loan, you can borrow:

• $2,625 your first year
• $3,500 your second year
• $5,500 for subsequent years
• A total of $23,000

If you're an independent student, you qualify for a larger unsubsidized Stafford Loan. You can borrow:

• $6,625 your first year
• $7,500 your second year
• $10,500 for subsequent years
• A total of $46,000

If you're a graduate or professional student, you can borrow:

• $18,000 annually
• A total of $138,500

For each of these amounts, subtract any amount you receive through the subsidized Stafford Loan program. For example, if you receive $2,625 in subsidized Stafford Loans, you qualify for only $4,000 in unsubsidized loans.

Keystone Plus

Unfortunately Stafford Loans don't always cover all college expenses.  The maximum amount, especially in the first year, doesn't go very far.  So parents often take out a PLUS Loan to cover the rest.  PLUS and Stafford Loans share a few traits.  Both carry variable interest rates.  Both charge an origination fee (usually equal to 3% of the loan).  The federal government uses the origination fee to reduce its program costs, while your loan guarantor uses your guarantee fee to purchase loans in default.

However, unlike the Stafford Loan program, PLUS Loans are made to parents.  They don't have an aggregate limit; parents can borrow the full amount of their children's college expenses, minus any financial aid received.  The PLUS Loan also differs from the Stafford Loan in that you cannot defer payments.  Parents start making payments within 60 days of disbursements.

Because PLUS Loans are based on creditworthiness instead of need, you'll probably go through the same loan process you would when borrowing for a car or a house.  We'll look at your credit rating, other loans, and any other delinquencies.  The interest rate for PLUS loans first disbursed on or after July 1, 2006 is fixed at 8.5%. The variable interest rate for PLUS loans first disbursed on or after July 1, 1998 and prior to July 1, 2006 is 8.02%.