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Unsubsidized Stafford Loan
Amounts, Limits, Interest, Forgiveness

An unsubsidized Stafford loan is like the consolation prize in the federal student financial aid sweepstakes. It must be repaid (unlike a Pell grant). And it's not a Perkins loan or a subsidized Stafford loan (although it can be consolidated with both of these types of loans).

This chart shows how federal school loans are structured:

A federal unsubsidized loan is a Stafford loan (named for Senator Robert Stafford (Vermont-R). It is a loan which is both funded and guaranteed by the federal government.

As of July 1, 2010, the FFELP program is no longer active. All schools must use the Direct Loan program if they want a Stafford loan. Students can still look for a private loan from competing lenders.

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However, the only lender for Direct federal student loans is the Department of Education. And all students who borrow from the federal government will have sign the master promissory note for Direct loans.

Stafford Unsubsidized Loan

"Unsubsidized" for a Stafford loan means that the federal government will not pay the interest on the loan while you are in school- you will. You can choose to have this interest deferred (along with principal) until 6 months after you graduate (or fall below half-time).

If you can make interest-only payments while you are in school, you will reduce the college loan debt that you face upon graduation.

You can check how much you can save, with the accrued interest calculator.

For instance, assume you take out the maximum Stafford loan amount for a freshman, $5500. When repayment is due you will owe $7058 on that loan alone, if you defer the interest. But if you can pay that $1558 over the 50 months deferment period, you will start your repayment as though it had been subsidized.

Don't forget that if you don't pay it, that $1558 of interest joins your principal and also accrues interest over the life of your loan.

To find out what your monthly interest only payments would be, use the loan interest payment calculator.

The federal interest rates for student unsubsidized Stafford loans are a fixed 6.8%.

(Parent college loans and Grad PLUS loans have a lower rate.)

While this rate is higher than the unsubsidized undergraduate rate, it compares favorably with private student loans. All federal rates are fixed. Most private loans have variable rates.

The biggest advantage of an unsubsidized Stafford loan is that it is easy to get. Because they are non-credit based student loans, a federal unsubsidized loan is sometimes called a "poor credit student loan". If you have a cosigner with excellent credit, you might be able to get a better loan from a credit union, but will the rate stay below 6.8% for the life of the loan?

Another advantage is that your loan does not depend on income. Although you must file a FAFSA to be eligible, an unsubsidized Stafford loan has no FAFSA EFC requirement.

The main drawback with this college loan are the...

Stafford Loan Limits

Each year has its own maximum amount:

Year	Dependent Student	Independent Student
First year	$5,500	$9,500
Second year	$6,500	$10,500
Third year	$7,500	$12,500
Fourth year	$7,500	$12,500
Grad school	$20,500	$20,500

The maximum lifetime limits are:

Dependent Undergraduate- $31,000
Independent Undergraduate- $57,500
Graduate Student- $138,500

These limits are higher than for subsidized loans. If you borrowed subsidized loans to their maximum limits and you still have unmet need, you can borrow unsubsidized loans until you reach these yearly and lifetime limits.

You can get student loan debt consolidation of these loans with subsidized Stafford loans, Perkins loans, Grad PLUS loans and even (your own, not your parents') Parent PLUS loans.

All federal student loan forgiveness programs apply to unsubsidized Stafford loans (as long as they are consolidated into federal Direct student loans).

The repayment programs for these loans are very flexible. There is a different loan payment formula for every need: standard 10-year; graduated; extended; income-based; income-contingent/sensitive; deferment and forbearance.

To change your federal student financial aid repayment, you will need to go through whichever servicer your loans are assigned to.