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What is a Stafford Loan?

Stafford Loans are among the most popular and available of federal student loans. If you're a graduate or undergraduate student enrolled in an eligible program of study on at least a half-time basis, you can apply for a Stafford Loan. To do so, you must fill out the federal government's financial aid application, the FAFSA, which stands for Free Application for Federal Student Aid.

Two types of Stafford Loans are available--subsidized and unsubsidized. Each loan has annual borrowing limits.

With a subsidized Stafford Loan, the federal government pays the interest on the loan while you're in school, for six months after graduation, and during any approved deferment periods. To qualify for a subsidized Stafford Loan, you must demonstrate financial need. Therefore, not everyone is eligible. Your financial need is based on the income and asset information you supply on the FAFSA.

With an unsubsidized Stafford Loan, you are responsible for paying the interest that accrues during the school year, in the six-month period after graduation, and during any deferment periods. Unsubsidized Stafford Loans are not based on financial need, so they can be obtained by students at all income levels.

The interest rate on Stafford Loans (subsidized or unsubsidized) issued before July 1, 2006 is variable (adjusted each July) and capped at 8.25 percent. The interest rate on unsubsidized Stafford Loans issued on or after July 1, 2006 is fixed at 8.25 percent, and the interest rate on subsidized Stafford Loans issued on or after July 1, 2006 is fixed as follows:

  • 6.8 percent for loans first disbursed on or after July 1, 2006 and before July 1, 2008
  • 6.0 percent for loans first disbursed on or after July 1, 2008 and before July 1, 2009
  • 5.6 percent for loans first disbursed on or after July 1, 2009 and before July 1, 2010
  • 4.5 percent for loans first disbursed on or after July 1, 2010 and before July 1, 2011
  • 3.4 percent for loans first disbursed on or after July 1, 2011 and before July 1, 2012

One final note: A Stafford Loan (subsidized or unsubsidized) can only be obtained from the federal government through the federal Direct Loan Program.