Stafford Loans

Your educational institution participates in one of two Stafford Loan programs. No matter which program funds your loan, the Stafford Loan is a popular choice among students because it has reasonable payment plans and a low interest rate.

Some schools participate in the William D. Ford Federal Direct Loan Program while others participate in the Federal Family Education Loan Program (FFELP). The two programs are essentially the same; the main difference is that the government acts as the lender for the Direct Loan program and a bank or other lending institution acts as the lender for the FFELP.

Stafford Loans by the Numbers
The maximum amount of Stafford Loan you can apply for increases every year. If you are a dependent student, you can qualify for a Stafford Loan of up to $2,625 during your first year of school. In your sophomore year, that amount increases to $3,500, and as you continue your four-year degree, you can earn up to $5,500 each year for the final two years. If you are an independent student, you can qualify for a larger loan amount, ranging from $6,625 to $18,500 depending on your year of study.

The total amount of all of your Stafford Loans cannot exceed $23,000 during your undergraduate career (as a dependent student) or $138,500 during your entire academic career. The interest rate of your Stafford Loan is fixed at a competitive market rate at the time your loan is disbursed, and can never exceed 8.25%. Some FFELP lenders may offer discounted interest rates if you participate in online payment plans or if you consistently make payments on time. Check with your lender for possible interest rate discounts.

Subsidized and Unsubsidized Stafford Loans
If you meet your school's guidelines for financial need, you may qualify for a subsidized Stafford Loan. The interest on a subsidized Stafford Loan is paid by the Federal government while you are enrolled at least half time. A subsidized loan could be the best deal for your financial aid package because you have a six-month grace period before you have to begin repayment on your Stafford Loan after you leave school or drop below half-time status

The interest on an unsubsidized Stafford Loan begins to accrue immediately. You can defer payment of the loan principle but you either have to make interest payments while you are enrolled or the interest is added onto your loan principle.

Additionally, qualified students can combine a subsidized Stafford Loan with an unsubsidized Stafford Loan to cover educational expenses. Complete a FAFSA online and your school's financial aid office will determine your eligibility for this popular loan.