College In Colorado

Stafford Loans are the largest source of financial aid funds. You will qualify for these loans as long as you are enrolled in college at least half-time each semester. When you accept a Stafford Loan, signing the Master Promissory Note (MPN) is your promise to repay the loan. Before any funds are disbursed to you, you must attend an entrance counseling session that explains the terms and conditions of the loan (your college will advise you how to fulfill this requirement).

The interest on Stafford Loans is fixed at a rate of *6.8 percent for loans disbursed on or after July 1, 2006. You will be required to begin making payments six months after you graduate or if you drop below half-time enrollment (the six months between graduation and beginning payment is called a "grace period"). Your scheduled payments will be at least $50 per month. Although you normally have up to 10 to 25 years to repay these loans, there are repayment plans that may give you additional time depending upon the amount you borrow. Remember however, the more time you take to repay your loan the more interest you will end up paying.

The amount of money you can borrow each year through a Stafford Loan varies by dependency status and college grade level. If you are a dependent student, your Stafford Loan limit is the amount listed in the base amount column in the chart below. The loan may be "subsidized," "unsubsidized" or a combination of both. (The exception is that you may qualify for the additional unsubsidized Stafford funds if your parent does not qualify for a PLUS loan. Talk with financial aid office personnel at your college to determine if you are eligible.)

If you are an independent student, you can borrow the base amount shown below (as subsidized, unsubsidized or a combination) plus the additional amount specified. The additional funds, however, will be unsubsidized funds only.

*While Stafford loans disbursed before July 1, 2008 are fixed at 6.8 percent, the interest rate for subsidized loans to undergraduates will decline each year for four years as itemized below.

Subsidized loan disbursed:

7/1/08 through 6/30/09      6.0%
7/1/09 through 6/30/10      5.6%
7/1/10 through 6/30/11      4.5%
7/1/11 through 6/30/12      3.4%

Unsubsidized Stafford loans and both subsidized and subsidized Stafford loans to graduate students will remain at 6.8 percent.

Subsidized or Unsubsidized Base Amounts

	Base Amount	Addition for Independent Students	Total for Independent Students
Freshman	$3,500	$4,000	$7,500
Sophomore	$4,500	$4,000	$8,500
Junior and Senior	$5,500	$5,000	$10,500
Graduate and Professional Student	$8,500	$10,000	$18,500

Maximum Undergraduate Borrowing	$23,000	$23,000	$46,000
Maximum Graduate and Professional Student Borrowing	$65,500	$73,000	$138,500

What is the difference between a "subsidized" and an "unsubsidized" Stafford loan?

Subsidized Stafford Loans
Subsidized Stafford Loans are low-interest rate loans available to undergraduate and graduate students with financial need as determined by completing and filing the Free Application for Federal Student Aid (FAFSA). These loans are "subsidized" because the federal government pays the quarterly interest payments for you while you are in college, during your grace period and during deferment rather than these interest payments being added to the principal balance of your loan.

Unsubsidized Stafford Loans
Unsubsidized Stafford Loans are low-interest rate loans available to undergraduate and graduate students. These loans are "unsubsidized" because you will be responsible for paying the interest on these loans. Even though the federal government does not pay the interest on Unsubsidized Stafford Loans while you are in college, you can choose, while you remain enrolled at least half-time each semester, to wait until you graduate to begin paying the quarterly interest payment on unsubsidized loans. However, if you choose to not pay the interest as it accrues, it will be added to the amount you borrowed (your principal balance), which will make your monthly payments higher when you do begin repaying your loan.

Examples of Monthly Repayment Amounts

Let’s look at a few examples of monthly repayment amounts for subsidized loans and unsubsidized loans.

The following examples were calculated at 6.80% with a repayment term of 10 years and a minimum monthly payment of $50. The example assumes that the maximum amount allowed was borrowed each year (Freshman: $3,500, Sophomore: $4,500, Junior: $5,500, Senior: $5,500) as a dependent undergraduate student.

Subsidized

Year	Total Amount Borrowed	Years to Repay	Monthly Payment	Total Interest	Total Repayment Amount
Freshman	$3,500	7.25	$50	$818.62	$4,318.62
Sophomore	$8,000	10	$88.82	$2657.97	$10,657.97
Junior	$13,500	10	$149.88	$4,485.32	$17,985.32
Senior	$19,000	10	$210.94	$6,312.67	$25,312.67

But what about borrowing using an Unsubsidized Stafford Loans and not paying interest on those loans while you are in college? What might your monthly payment be in that case and how much interest will accrue on your loans? Let’s look at the same loan amounts shown above to compare.

Unsubsidized*

Year	Total Amount Borrowed	Capitalized Interest	Repayment Balance	Years to Repay	Monthly Payment	Interest During Repayment	Total Repayment Amount
Freshman	$3,500	$1,031.33	$4,531.33	10	$52	$1,726.27	$6,257.60
Sophomore	$8,000	$2,051.33	$10,051.33	10	$115.67	$3,829.19	$13,880.52
Junior	$13,500	$2,924.00	$16,424.00	10	$189.01	$6,256.95	$22,680.95
Senior	$19,000	$3,422.67	$22,422.67	10	$258.04	$8,542.23	$30,964.90

As you can see, if you don’t pay the interest while you are in school, your monthly payments and the total repayment amounts are higher. Higher monthly student loan payments may cause you to postpone purchases in the future, such as buying a new car, a house, home furnishings or taking vacations, while you are repaying your student loans.

No matter which loan(s) you decide to accept, be a wise borrower and only borrow what you need to pay for your educational expenses each year. The SLOPE Calculator and the Loan Repayment Guide can help you determine this amount.