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Any student going to an accredited college or university can receive a Stafford Loan, thus, there is no adjusted gross income ceiling. Low to moderate adjusted gross income determines Pell Grant awards; those in higher income brackets do not qualify for the Pell. Students apply for this type of financial aid through FAFSA -- Free Application For Student Aid.
Any student, no matter the financial status of their parents, can receive a Stafford Loan. All they have to do is fill out the FAFSA and make sure they attend a qualifying school for more than half time. For the 2012 to 2013 school year, the fixed rate loan was as low as 3.4 percent and, depending on the year of attendance, a student could borrow up to $20,500. Graduate students could borrow up to $20,500 per year at a rate of 6.8 percent. Eligibility is not based on the parent’s adjusted gross income because graduate students are considered independent.
A Stafford Loan is divided into two portions: subsidized and unsubsidized. These designations determine how interest is paid, and it is important to keep in mind that a Stafford Loan generates interest while the student is in college. If a portion of the Stafford Loan is subsidized, then the interest accumulated during the time the student is in school is paid by the federal government. The interest on the unsubsidized portion accumulates while the student is in school, but does not need to be paid until after graduation. It can be added to the principal amount of the loan or paid while in school.
Although there are no income cutoffs to receive a Stafford Loan, there are income guidelines schools use to determine the amount of loan that’s subsidized versus unsubsidized. According to FinAid.com, about two-thirds of families making less than $50,000 adjusted gross income have a portion of their Stafford Loans subsidized. Only one-third of families with an AGI between $50,000 and $100,000 see a portion of their loans subsidized. There is also a difference in the interest rate of the unsubsidized versus subsidized Stafford Loan. Subsidized have a fixed rate of 3.4 percent and the unsubsidized rate is 6.8 percent.
Families can use the FAFSA Forecaster to determine the estimated family contribution to their qualifying student's education. This figure is essential in coming up with a financial aid package. Although not as accurate as the FAFSA itself, this tools allows college candidates to see what loans they qualify for, as well as federal grants and work study program. Adjusted gross income is the main factor in determining the estimated family contribution.