Stafford Loans: FFELS and Direct Loans


FFEEL and Direct Loans

Stafford Loans, offered to the students, has both the Federal Family Education Loan (FFEL) Program and the William D. Ford Federal Direct Loan (Direct Loan).

This either programs mostly are offered in all the schools. The principal differences between them are:
     The plan of repayment.
     Direct Loan funds come from the federal government.
     FFEL funds come from the bank or any other lender.
First, you must complete the FAFSA process. Then, after your school inspects your results will let you know if you are eligible. The next step is the lender selection for the FFEL program. Generally, the school has a list of preferred lenders, you can choose from this list or prefer for another one.

The mount of the payment will be according to your year in school and a subsidized or unsubsidized loan. A subsidized loan is when the government will pay the interest during your time in school plus the next six months, and have qualified for deferred payments. Otherwise, you will receive an unsubsidized loan.
     For a dependent undergraduate student, the annual loan would be up to:
      • $3,500: First-year student, and enrolled in a program fully academic.
      • $4,500: One completed year of study, and a reminder year fully academic.
      • $4,500: $5,500: Two completed years of study and a reminder  year fully academic.
     For both, an independent undergraduate student and a dependent student who has not been eligible for the PLUS Loan; annually the loan would be up to:
      • $7,500: First-year student, and enrolled in a program fully academic. ($3,500 may be a subsidized loan).
      • $8,500: One completed year of study, and a reminder year fully academic. ($4,500 may be a subsidized loan)
      • $10,500: Two completed year of study, and a reminder year fully academic ($5,500 may be a subsidized loans)
     For a graduate or professional degree student, the annual loan would be up to $20,500 ($8,500 may be a subsidized loans).
Mostly, the school will pay the student, for both the Direct Loan and the FFEL, in at least two periods of repayments. Generally, for a first-year undergraduate student and first-time borrowers, the school cannot pay until 30 days after the first day of the registration period.

The chapter below shows the interest, which rate varies according to the date of application, for both Direct Loans and FFEL program, during 2007-2008 period.

Loan Type Status Program
7/1/2007 to 6/30/2008
Direct Loans FFEL
Subsidized Loans Repayment or Forbearance 6.80 6.80
In-School, Grace, or Deferment 6.80 6.80
Unsubsidized Loans Repayment or Forbearance 6.80 6.80
In-School, Grace, or Deferment 6.80 6.80
PLUS Loans All 7.90 8.50

From July 1, 2008, the interest rate will be reduced. The following rates apply to subsidized Stafford loans paid from July 1 of each year to June 30 of the next year. For any unsubsidized Stafford Loan continue at the current interest rate of 6.8 percent.

First disbursement of a loan Interest rate on the unpaid balance
Made on or after Made before
July 1, 2008 July 1, 2009 6.0 percent
July 1, 2009 July 1, 2010 5.6 percent
July 1, 2010 July 1, 2011 4.5 percent
July 1, 2011 July 1, 2012 3.4 percent

For both Direct Loan and FFEL, the grace period is 6 months, counting after the graduation, or dropping below half-time enrollment. Usually, the repayment is monthly and the lender must be punctual. During this period, for subsidized students there is no principal payment or interest; and for unsubsidized students there is no principal payment but the interest will be charged.

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