Graduate Stafford Loans (Summer 2012)

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Stafford Loans may be subsidized by the U.S. Government or unsubsidized depending on the student's financial need. Please see below for more information.

Stafford Subsidized Loan

Subsidized loans are available to students who demonstrate financial need as defined by the FAFSA. This loan is called "subsidized" because the government pays the interest on the loan while the student is enrolled in school and during the grace period. The loan goes into repayment six months after the student graduates or is no longer enrolled half-time.

Interest Rates and Fees for Federal Direct Loans

Program of Study Fixed Interest Rate Loan Fees (see below)
Federal Direct Subsidized Loan 6.8% 0.5%
Federal Direct Unsubsidized Loan 6.8% 0.5%

Federal Direct Subsidized and Unsubsidized Loan Fee Rebate

These loans have a 1.0% Origination Fee and offer a 0.5% Rebate on the Origination Fee. This results in a net Loan Fee of 0.5%, which will be deducted from the gross amount of the loan.

If you fail to make 12 on-time monthly loan payments, you will be charged for the initial Rebate and it will be added back to the outstanding balance of the loan.

If your first 12 monthly loan payments are made on time, the Rebate will become permanent.

Budget Control Act of 2011

The Budget Control Act of 2011 contains two provisions related to graduate student aid:

Elimination of the in-school loan interest subsidy for graduate and professional students

The Budget Control Act eliminates the in-school interest subsidy for graduate and professional students beginning July 1, 2012, a provision that would save $18.1 billion from FY 2012–21, $8.2 billion of which is from FY 2012–16, according to the Congressional Budget Office (CBO). The legislative language clarifies that the subsidy elimination does not apply to students taking preparatory coursework and those in programs leading to teacher certification where the credential is awarded by the state instead of the institution.

Elimination of Direct Loan repayment incentives

Repayment incentives were also eliminated in the final package. The incentive for using automatic debit repayment provided borrowers with a 0.25 interest rate reduction and the up-front interest rebate incentive was equal to 0.5 percent of the loan amount and applied toward the 1 percent loan origination fee. For PLUS loans, the up-front interest rebate was 1.5 percent applied toward the 4 percent origination fee. Borrowers were able to keep the rebate if they made their first 12 payments on time. The language prohibits the Department of Education from authorizing or providing repayment incentives on new loans disbursed on or after July 1, 2012, except that an interest rate reduction may be provided to a borrower who agrees to automatically debited electronic payments. The CBO projects the elimination of the origination fee rebates would yield $3.6 billion from FY 2012–21.

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