Direct Federal Stafford Loans
The Federal Stafford Loan program provides both subsidized (need-based) and unsubsidized (non-need-based)
loans to qualifying students. Federal Stafford Loans disbursed before July 1, 2006 have a variable interest rate
with an 8.25 percent cap. New Federal Stafford Loans disbursed on or after July 1, 2006 have a fixed 6.8 percent
interest rate. Starting in the 2009-2010 academic year, the University of Detroit Mercy will participate in the
Federal Direct Loan Program which means that the school will process loan applications internally and receive all
Federal Stafford Loan funds directly from the US Department of Education rather from banks or other lenders. All
loan recipients will need to complete a new Federal Direct Loan Program Master Promissory Note online to receive
Interest on subsidized Federal Stafford Loans is paid by the federal government until six months after the
borrower graduates, leaves the institution, or reduces enrollment to less than half-time. These loans are based on
financial need and are limited to no more than $8500 annually.
Interest on unsubsidized Federal Stafford Loans accrues from the time of disbursement and may be paid on a
regular basis or deferred during periods of enrollment of at least a half-time basis. Deferred interest is capitalized
at the time repayment begins. These loans are not based on need and may range up to $20,500 minus any
subsidized Stafford amount.
Repayment on both subsidized and unsubsidized Federal Stafford Loans begins six months after the borrower
graduates, leaves the institution, or reduces enrollment to less than half-time. The standard repayment term is ten
years, but students who borrow more than $30,000 in federal loans may take advantage of a 25-year extended
program to repay their loans.
Federal Stafford Loans, at the option of the student, may be consolidated upon graduation with the student’s other
federal student loans, such as Guaranteed Student Loans, National Direct Studen