Stafford Loans

The Most Popular Student Loan

Stafford Loans are the most common form of Federal financial assistance to students seeking to further their secondary education. They have a lot going for them:

  • Low interest
  • Easy to qualify
  • Undergraduate and graduate students may qualify
  • Government pays the interest on subsidized Stafford loans while student is in school
  • Students qualify for higher annual limits each year
  • No credit check required
  • Six-month grace period following graduation

Types of Stafford Loans

  • The Subsidized Stafford Loan is a need based low interest student loan in which the government pays the interest on the loan as long as the student remains enrolled in an accredited university or college. A six month grace period following graduation or cessation of classes allows the student time to enter the workforce and make suitable arrangements to begin repayment.
  • The Unsubsidized Stafford Loan is not awarded on the basis of financial need, and virtually every student who applies for this loan will receive it. Student borrowers are responsible for all accrued interest as soon as the loan has been disbursed.  Students can choose to defer these payments until after graduation and have the interest accrued added to the principal. The unsubsidized Stafford Loan allows for a six month grace period following graduation before the borrower must begin repayment.

Applying and Qualifying for a Stafford Loan

The first step towards qualifying for a Federal Direct Stafford Loan is to fill out and submit the Free Application for Federal Student Aid, or FAFSA. When you file your FAFSA, you have applied for any Federal loan or grant you might be eligible for.


Almost every applicant is eligible for either a subsidized or unsubsidized loan package. Basic eligibility requirements for the Stafford Loan include:


  • Student must be a U.S. Citizen, permanent resident or eligible non-citizen
  • Student must complete and submit the FAFSA before the annual deadline
  • Student must be enrolled at least half-time in an accredited college
  • Student must not be in default on any other education loan

To qualify for a subsidized Stafford Loan student must meet the income requirements for need based aid.

Stafford Loan Interest Rates and Fees

Unsubsidized and Graduate Stafford loans have a fixed interest rate of 6.8 per cent. In the 2012-2013 academic year, interest rates for subsidized Stafford Loans are moving to 6.8 per cent. This rate is fixed.

Stafford Loan Limits

How much you may borrow under the Stafford Loan program depends on several factors, including:


  • · How much you already have been awarded on other loans.
  • · Cost of your tuition.
  • · Undergraduate or graduate status.
  • · Your current year of school (freshman, sophomore…).


On average, dependent undergraduate students may borrow between $3,500 and $5,500 and independent students may borrow between $9,500 and $12,500.

Repaying Your Stafford Loans

If you have a subsidized Stafford Loan, you do not begin repayment until your standard 6-month grace period is over. During this time you are given information on repayment and reminded of loan terms and details of your payment schedule. If you have an unsubsidized Stafford Loan, repayment begins immediately, but most student choose to defer repayment for a six-month grace period.


When you sign your loan documents, you agree to a repayment schedule. There are several options:


  • Standard repayment plans feature balanced monthly payments for a fixed term, usually 10 years.
  • Graduated repayment plans are helpful for borrowers unsure how lucrative their first job will be, but are fairly confident their earnings will grow. Payments start out small and gradually get larger over the life of the loan.
  • Extended repayment features a longer loan life so borrowers have smaller monthly payments. Payments may be standard or graduated.
  • Income sensitive repayment features variable payments that remain flexible and proportionate to your level of income. If you are in a business or job where income could fluctuate, this is a good option.


Most students take out multiple student loans, and if you have problems repaying your loans, you should consider a Consolidation Loan. This loan helps borrowers manage their debt by placing all of their loans with one lender and reducing their payments to one manageable monthly bill.