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stafford loans

"Loans: The Stafford Loan Program"



The government awards three types of financial aid for higher education: grants, loans, and work-study. In the loan category there are four major programs backed by Uncle Sam: The Stafford Loan Program, PLUS Loan Program, Consolidation Loan Program, and the Perkins Loan Program.

The following are details about the Stafford Loan Program:

Details: There are two types of Stafford Loans: (FDSLP) Direct Stafford Loans and (FFELP) Stafford Loans. Direct Stafford Loans are available through the William D. Ford Federal Direct Loan Program, with the U.S. government as the lender. FFELP Stafford Loans are available through the Federal Family Education Loan Program with participating banks, credit unions, or other private lenders. For FFELP Stafford Loans, you will locate a lender by contacting your school or the Federal Student Aid Information Center (1-800-4-FED-AID).

Eligibility: You must be enrolled at least half time.

Based on: Subsidized loans are based on financial need. The government subsidizes the interest payments so that you are not charged interest before you begin repayment or in approved periods of deferment. Unsubsidized loans are not based on financial need. You are charged interest from the time the loan is disbursed until it is paid off. In one school year, you can have a Subsidized Stafford Loan, Unsubsidized Stafford Loan, or both.

How much can I borrow with a Stafford loan?


Annual Loan Limits - Stafford Loan
Dependent Students
(whose parents were not denied a PLUS loan)
Combined Base Limit for Subsidized and Unsubsidized Loans Additional Limit for Unsubsidized Loans Total Limit for Unsubsidized Loans (minus subsidized amounts)
First-Year Undergraduate (Freshman) $3,500 $2,000 $5,500
Second-Year Undergraduate (Sophomore) $4,500 $2,000 $6,500
Third-Year and Beyond Undergraduate (Junior, Senior) $5,500 $2,000 $7,500
Preparatory Coursework (for enrollment in an undergraduate program) $2,625 $0 $2,625
Preparatory Coursework (for enrollment in a graduate or professional program) $5,500 $0 $5,500
Teacher Certification Coursework $5,500 $0 $5,500
Independent Students
(and dependent students whose parents were denied a PLUS loan)
Combined Base Limit for Subsidized and Unsubsidized Loans Additional Limit for Unsubsidized Loans Total Limit for Unsubsidized Loans (minus subsidized amounts)
First-Year Undergraduate (Freshman) $3,500 $6,000 $9,500
Second-Year Undergraduate (Sophomore) $4,500 $6,000 $10,500
Third-Year and Beyond Undergraduate (Junior, Senior) $5,500 $7,000 $12,500
Preparatory Coursework (for enrollment in an undergraduate program) $2,625 $6,000 $8,625
Preparatory Coursework (for enrollment in a graduate or professional program) $5,500 $7,000 $12,500
Teacher Certification Coursework $5,500 $7,000 $12,500
Graduate and Professional Students Combined Base Limit for Subsidized and Unsubsidized Loans Additional Limit for Unsubsidized Loans Total Limit for Unsubsidized Loans (minus subsidized amounts)
Graduate and Professional Students $8,500 $12,000 $20,500
Medical School Students $8,500 $32,000 $40,500

Aggregate Loan Limits - Stafford Loan
  Combined Base Limit for Subsidized and Unsubsidized Loans Additional Limit for Unsubsidized Loans Total Limit for Unsubsidized Loans (minus subsidized amounts)
Dependent Undergraduate Students (whose parents were not denied a PLUS loan) $23,000 $8,000 $31,000
Independent Undergraduate Students (and dependent students whose parents were denied a PLUS loan) $23,000 $34,500 $57,500
Graduate and Professional Students $65,500
(including undergraduate Stafford loans)
$73,000 $138,500
Medical School Students
(Effective 4/18/08 per DCL GEN-08-04)
$65,500
(including undergraduate Stafford loans)
$158,500 $224,000

What is the interest rate on a Stafford loan?
Stafford loan interest rates are variable and are adjusted every July 1st (based on the 91-day Treasury Bill + 1.7% while you're in school, grace or deferment and + 2.3% during repayment). Stafford interest rates are capped and will not exceed 8.25%

The College Cost Reduction and Access Act of 2007 reduced the interest rates on subsidized Stafford loans for undergraduate students starting July 1, 2008. These reductions are available only to undergraduate students, not graduate students, and only for subsidized Stafford loans, not unsubsidized Stafford loans. The interest rates are illustrated in the following table.

Phased-in Cuts in Interest Rates on
Subsidized Stafford Loans for Undergraduate Students
Year Interest Rate
Subsidized Stafford Loans
(Undergraduate Students)
Interest Rate
Other Stafford Loans
(Graduate or Unsubsidized)
2007-08 6.8% 6.8%
2008-09 6.0% 6.8%
2009-10 5.6% 6.8%
2010-11 4.5% 6.8%
2011-12 3.4% 6.8%
2012-13 6.8% 6.8%


Are there any charges for a Stafford loan?
There is a combined fee of up to 4% of the loan, comprised of a 3% origination fee that goes to the federal government and a 1% guarantee fee that goes toward the guaranty agency that insures your loans. These fees are deducted proportionately from each loan disbursement so that you aren't required to come up with any up-front money to obtain the loan.

To apply: Complete the Free Application for Federal Student Aid (FAFSA).

For help with your FAFSA application: Remember that the FAFSA is free. If you help with the form, go here.

How you get the money: The money will be disbursed to your school either by the Department of Education for Direct Stafford Loans or by the lender for FFEL Stafford Loans. The money must first be used for tuition, fees, and room and board. After these expenses are paid, you will receive the remaining amount in a check.

How you repay the money: You will begin to repay your loan after you graduate, leave school, or drop below half-time enrollment. For Direct Stafford Loans, you can pay using one of four methods: the Standard Repayment Plan of a fixed amount per month for up to 10 years; the Extended Repayment Plan, which extends the repayment period to generally between 12 and 30 years; the Graduated Repayment Plan, in which your payments start lower and increase generally every two years; or the Income Contingent Plan, in which your income affects the amount of your monthly payments.

For FFEL Stafford Loans, you can pay using one of three methods: Standard Repayment Plan, Graduated Repayment Plan, or the Income-Sensitive Repayment Plan, in which your income affects the amount of your monthly payments. All loans must be repaid within 10 years.

Under certain circumstances, you can receive a deferment to temporarily postpone payments on your loan. For subsidized loans, you do not pay interest during the deferment period. For unsubsidized loans, you do. Under certain circumstances you can receive forbearance, a limited and temporary postponement or reduction of your payments if you are unable to meet your repayment schedule and are not eligible for a deferment. These circumstances may include poor health, serving in a medical or dental internship or residency, or if the payments exceed 20 percent of your monthly gross income. For both subsidized and unsubsidized loans, you pay interest during the forbearance period. Deferments and forbearance must be approved by the Direct Loan Servicing Center (1-800-557-7392) if you have a Direct Stafford Loan or with the lender if you have an FFEL Stafford Loan.

Thank you for visiting,

Al Brouillard

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