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Federal Stafford Loans

Last updated 29th Nov 2022


The Federal Stafford Loan program provides financial aid for both graduate as well as undergraduate students. Stafford Loans are part of the Direct Loan program, and nearly all students are eligible to receive either subsidized or unsubsidized loans.

Note: As a result of the Health Care and Education Reconciliation Act of 2010, FFEL Stafford Loans are no longer made by private lenders. Instead, all new federal student loans come directly from the U.S. Department of Education under the Direct Loan Program. This article preserves information for former students in repayment.


As of July 2010, all Stafford Loans are made available through the Direct Loan Program. As part of this program, the federal government loans the money to the student. There are two types of Federal Stafford Loans:

  • Subsidized: interest due on the loan is paid by the federal government as long as the student is in school, during a 6-month grace period following cessation of at least half-time enrollment, and for any periods of authorized deferment after beginning repayment.
  • Unsubsidized: contains the same features as the Subsidized Federal Stafford Loan including deferments, interest rates, and loan limits. However, the student is responsible for the growth of interest payments while attending school, during periods of authorized deferments, and during grace and repayment periods.

The Free Application for Federal Student Aid, or FAFSA, is used by students to apply for all federally-funded student loans, including the Stafford Loan program. Depending on the student's status, dependent undergraduate students can:

  • Borrow up to $5,500 if they are a first-year student enrolled in a program of study that runs at least a full academic year.
  • Borrow up to $6,500 if the student has completed their first year of study, and the remainder of the program runs at least a full academic year.
  • Borrow up to $7,500 if the student has completed two years of study, and the remainder of the program runs at least a full academic year.

The loan limit for graduate students is up to $20,500 per calendar year.

In the 2012 / 2013 school year, the interest rate for subsidized loans is 3.4%, while the interest rate on unsubsidized loans and graduate loans is 6.8%. Repayment is required once the student falls below half-time status. Once in repayment, there are four schedules to choose from:

  • Standard: fixed monthly payments throughout the term of the loan
  • Graduated: payments are lower when repayment begins and increase over time
  • Income Based: payments will vary depending on the borrower's income
  • Extended: loans in excess of $30,000 are eligible for both Standard or Graduated repayment plans with terms of up to 25 years

The Standard, Graduated and Income-Based repayment plans allow terms of up to 10 years.

Related Terms

Direct Loans, PLUS Loans, Federal Work Study, Grants

Moneyzine Editor

Moneyzine Editor