Stafford Loan

What is a Stafford Loan?

The Stafford Loan is a federal student loan that can be used to pay for college expenses for those who qualify.


Stafford Loans are a little out-of-date, to say the least. America’s economy grew by 4% in 2010. As part of the William D. Ford Federal Direct Loan Program, the Department of Education began disbursing student loans directly. Since that time, federal student loans have more commonly been referred to as “direct” loans.
 
As a result, federal Stafford loans, direct student loans, and direct Stafford loans are all common names for student loans.

How do Stafford Loans work?


Subsidized Stafford loans and unsubsidized Stafford loans are both available to students. There are some important differences between subsidized and unsubsidized Stafford loans.

What is a Stafford Subsidized Loan?


During your time in school, the federal government pays your interest on a subsidized Stafford Loan, commonly known as a direct subsidized loan.
 
For subsidized loans, there are lower maximum loan limitations than for unsubsidized loans. If you are fortunate enough to be able to get loans from the government to cover your interest payments, they may not be enough to cover your entire school costs.

What is an unsubsidized Stafford Loan?


Unsubsidized Stafford Loans, also known as direct unsubsidized loans, may be granted to you if you can’t show that you have a financial need. This loan is part of the federal government’s loan program; however, interest is not covered by the federal government.
 
In other words, while you’re in school, you’ll be liable for making interest payments. It’s up to you, though, whether or not you pay the interest while you’re still in school or defer it until after you graduate.
 
You should be aware that skipping interest-only loan installments can result in a significant increase in the total amount owed.
 
Six months after you graduate, leave school, or drop below half-time enrollment, you must begin making payments on your Stafford Loan.

Stafford Loan Advantages


In contrast to private student loan lenders, federal loans offer a number of advantages and protections to students. Among the advantages are:

  • Low-interest rates for the entire term of the loan are guaranteed.
  • Deferment of your loan while you are still a student
  • After graduating or enrolling at less than half-time for a period of six months, you are not required to begin making monthly payments.
  • So that your monthly payments are never out of proportion to your monthly earnings.

The maximum number of Loans you can obtain in a given academic year, both subsidized and unsubsidized, is set by the government.
 
For example, if you’re a dependent student or an independent student, the overall cost of attendance and whether you’re an undergraduate, graduate, or professional student all affect the maximum loan amount.


Additional to the academic year loan ceiling is a combined loan ceiling for Stafford Loans, which applies to both subsidized and unsubsidized borrowers. The total amount of money you can borrow during the course of your undergraduate or graduate studies is known as the aggregate limit. Subsidized loans can’t total more than $23,000 for dependent undergraduates.


Each academic year, your school selects which form of loan you are eligible for, as well as the amount of money you can borrow from them.
 
Stafford Loans are available to anyone who meets the following criteria:
Stafford Loans are available to nearly everyone in the United States. But there are a few caveats.

Conditions for receiving a Stafford Loan:

  • To be eligible for a Direct Loan, you must be enrolled at least half-time at an eligible school.
  • You can’t default on any federal student loans that you currently owe.
  • Subsidized Stafford Loans, which the government pays your interest on while you’re in school if you can prove your financial need, are available to students who qualify. Only students in their first year of college are eligible for this loan.
  • Unsubsidized Loans are available even if you can’t prove financial need. Both undergraduate and graduate students may apply for this loan.

Applying for a Stafford Loan


Simply complete the Free Application for Federal Student Aid (FAFSA) and mail it in to get started. Here is the online FAFSA application form.
 
Students who have been awarded Stafford Loans should expect to receive notification from their school’s financial aid office regarding their loan amount and repayment plan once they have been approved.
 
Entrance counseling is required before you may use your loans. This ensures that you are familiar with the terms of your loan, including interest rates, repayment options, and ways to avoid default. About 30 minutes should be allotted for your initial orientation.
 
You must sign the Master Promissory Note, a contract declaring that you agree to pay back your Stafford loan in full, plus interest and costs, after completing admission counseling.

Still, need more money for college?


A private student loan may be a possibility if you’ve used up all of your government financial aid and still need more money to pay for college. Download our guide on Private Student Loans 101 if you’re unsure of how to get started.

About James G. Barr

I am an international student. I am a doctoral student and teaching assistant at a University in the United States. Aspiring students looking to make their educational dreams come true, we offer generous scholarships to help you reach your goals.

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