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Home > Degree Programs > Student Financial Services > Student Loans > Stafford Loans
Stafford Loans
Two Types of Stafford Loans
US Citizens and permanent residents are eligible to receive a Federal Direct Stafford Loan. There are two types of Stafford Loans:
- Subsidized Stafford
- Unsubsidized Stafford
In most ways the Subsidized and Unsubsidized Stafford are the same: they have the same interest rates, repayment terms and grace period. They differ in two respects: The Subsidized Stafford does not accrue interest while you are in school and during the six-month grace period. The Unsubsidized Stafford does accrue interest while in attendance. Borrowers will receive interest statements quarterly reflecting accrued interest and offering the option to either pay the accrued interest or allow it be be added on to the base amount that you borrowed.
Subsidized and Unsubsidized Loans also differ in the amounts for which students are eligible. The maximum amount that students can receive in Subsidized Stafford is $8,500 though the actual amount may be less depending upon students' unmet financial need. Students can borrow up to an additional $12,000 in Unsubsidized Stafford. The maximum total amount, therefore, that can be borrowed per academic year is $20,500. If a student is not eligible for the full amount of their Subsidized Stafford (e.g. they are only eligible for $5,000) whatever portion they could not get in Subsidized Stafford (in this case $3,500) they can receive in additional Unsubsidized Stafford (e.g. in this case the student would be receiving $5,000 Subsidized and $13,500 Unsubsidized) as long as the total of all financial aid does not exceed the student's cost of attendance.
Interest Rates
Beginning July 1, 2006 the interest rate for all Stafford Loans disbursed after July 1, 2006 will be fixed at 6.8%.
For all loans disbursed prior to July 1, 2006, the interest rate for the Stafford is equal to the 91-Day Treasury Bill rate as auctioned on May 28th of each year plus 1.7% while enrolled or the grace period. The rate is equal to the 91-Day Treasury Bill rate plus 2.3% while in repayment.
Repayment Terms
The standard repayment plan is 10 years. Students who are interested in determining what their estimated monthly payment might be can consult a loan calculator. Students may also elect to take longer to repay their loans--and therefore reduce their monthly payments--by electing to take the extended repayment plan. This plan allows a longer repayment term as the amount you borrow increases. Students borrowing $35,000, for example, can take up to 20 years to repay.
The advantage of this plan is that it reduces your monthly payments. However, if you avail yourself of the entire repayment term, you will have paid significantly more interest than had you paid your loan over 10 years. For example, you would pay $13,333 in interest if you paid your Stafford off in 10 years at the interest rate of 6.8%. If you took 20 years, you would have paid $29,120--more than twice the interest you would have owed had you paid it over the shorter period. While there is no penalty for early repayment--and therefore you could elect to take the longer plan and then still pay it off over 10 years--it is advisable to select the shorter plan if you can afford to do so.
Students who find that monthly payments under the extended repayment plan are difficult to manage, may wish to consider the Income Contingent repayment plan. This plan bases your monthly on your annual salary and therefore monthly payments are often less initially during the early part of your career and increase in later years as your salary increases.
Deferments and Forbearances
There are periods of time during which borrowers are not required to make payment on their Stafford Loans. These periods are called Deferments and Forbearances. Borrowers are eligible for Deferments while enrolled at least half-time in degree programs, during periods of unemployment, while on active duty in the military during war-time or national emergency and when experiencing temporary financial hardship. Deferments for other than being enrolled in degree programs are limited to a cumulative period of three years.
Students not qualifying for a deferment- but who are experiencing financial difficulty - can request a Forbearance. Forbearances are fairly easy for which to qualify but, unlike Deferments, interest continues to accrue on the entirety of the loans whereas during Deferments no interest accrues on the Subsidized portion of your Stafford Loan.
How to Apply
In order to be eligible for a Stafford, you must be a US Citizen or permanent resident who is not in default on a student loan and who meets other federal criteria including registration with selective service (if male), demonstrating financial need (for the Subsidized Stafford) and submission of all application materials. These include:
- Free Application for Federal Student Aid (FAFSA). Be sure you use the correct school code (E00215). Many students inadvertently select the Harvard Code (002155) and we will never receive your results if you do so.
- HKS Online Application for Financial Assistance
- Complete verification information, if selected
Loan Entrance Counseling and Completing Promissory Note
During your orientation you will attend an Stafford Loan entrance counseling session during which you will be informed of your rights and responsibilities associated with borrowing a Stafford. You will also need to complete online certification that acknowledges your acceptance of the terms. At this meeting, you will also receive instructions on how to complete your promissory note on-line. This promissory note will remain in effect for the entire period of attendance at Harvard Kennedy School thus you will not have to complete a second promissory note in the second year if you are enrolled in a two-year program.
Disbursement
Stafford Loans are disbursed half in the fall and half in the spring. The amount that is disbursed is 98.5% of the gross amount that you borrowed due to the fact that the federal government charges a guarantee fee that it uses to offset the costs associated with defaults. Please note that while your loan may show up as anticipated aid offsetting your bill, the actual funds cannot disburse until you have completed the Stafford entrance counseling session, completed your promissory note, and submitted all outstanding financial aid documents. The school is unable to issue you a refund of excess financial aid funds until after all requirements are completed.
Stafford Loan Exit Counseling
Students are required by federal regulations to complete a loan exit counseling session prior to graduation. More information will be provided in the April prior to graduation.
Contact
If you have additional questions, you are encouraged to contact your financial aid counselor:
Student Financial Services Office: US Citizens not enrolled in the MPA/ID program
Student Financial Services Office: US Citizens enrolled in the MPA/ID program
More information can also be found at the US Department of Education
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