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What is a Stafford Loan?

The Stafford Loan is a federal education loan offered to eligible students to cover higher education costs. 

The term ‘Stafford Loan’ is a bit outdated. In 2010, the U.S. Department of Education started disbursing student loans directly, under the William D. Ford Federal Direct Loan Program. Since then, federal loans are more often referred to as direct student loans. 

So, you may see student loans referred to as Federal Stafford Loans, Direct Student Loans, or Direct Stafford Loans. The good news: they all mean the same thing. 

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How do Stafford Loans work?

Student borrowers qualify for one of two types of Stafford loans: subsidized Stafford Laoans or unsubsidized Stafford loans. Subsidized and unsubsidized Stafford loans are a lot alike, but with a few key differences. 

What is a subsidized Stafford Loan?

If you qualify for a subsidized Stafford Loan, also known as a direct subsidized loan, the federal government pays your interest while you're in school, which can save you thousands of dollars. 

One thing to note: There are maximum loan limits for subsidized loans that are lower than the limit on unsubsidized loans. So, while it’s great that the government is helping you out with the interest payments, the amount you're eligible to receive in loans may not be enough to fully fund your education.

What is an unsubsidized Stafford Loan?

If you can't demonstrate financial need, you will likely be offered an unsubsidized Stafford Loan, also known as a direct unsubsidized loan. Even though this loan is part of the federal government’s loan program, they do not help you out with the interest. 

In other words, you will be responsible for the interest payments while in school. But you do have a choice about how you want to make those payments — you can either make the interest payments while in school or put them off until you leave. 

Just know that skipping out on the interest-only loan payments can add thousands of dollars to the overall amount of the loan. 

You will need to start making payments on your Stafford Loan six months after you graduate or after you leave school or drop below half-time enrollment. 

See also: Subsidized vs. Unsubsidized Student Loans: What's the difference?

The benefits of Stafford Loans

Federal loans offer student borrowers certain benefits and financial protections typically unavailable through private student loan lenders. Some benefits include: 

  • Fixed, low interest rates throughout the life of the loan
  • Automatic deferment while you're still in school
  • A six-month grace period after graduation, or after you enroll at less than half-time, before you have to start making monthly payments
  • Income-based repayment plans, so your monthly payments are never disproportionate to your monthly income. 

Stafford Loan amounts: How much can you get from a Stafford Loan?

The Stafford Loan has limits on the amount of subsidized and unsubsidized loans you can receive in an academic year. 

The loan amount limit changes depending on the year of school you are in, whether you're a dependent or independent student, the total cost of attendance, and whether you're an undergraduate student, graduate student, or professional student.

Borrowing limits: Undergraduate & graduate/professional students

Academic Year 

Annual Loan Limit (unsubsidized)

Aggregate Loan Limit (unsubsidized)

Annual Loan Limit (subsidized)

Aggregate Loan Limit (subsidized)

First Year (Independent)

$9,500 $9,500 $3,500 $3,500

First Year (Dependent)

$5,500 $5,500 $3,500 $3,500

Second Year (Independent)

$10,500 $20,000 $4,500 $8,000

Second Year (Dependent)

$6,500 $13,000 $4,500 $8,000

Third Year & beyond (Independent)

$12,500 $32,500 $5,500 $13,500

Third Year & beyond (Dependent)

$7,500 $20,500 $5,500 $13,500

Lifetime limit (Independent)

$57,500 $23,000

Lifetime limit (Dependent)

$31,000 $23,000

Graduate & Professional students

$138,500 (includes undergraduate federal loans) $20,500

Note: Loan limits accurate as of Jan. 2022

In addition to academic year loan limits, there is also an aggregate loan limit for subsidized and unsubsidized Stafford Loans. The aggregate limit is the amount you're allowed to borrow throughout your entire undergraduate or graduate academic career. For dependent undergrads, the aggregate limit is $31,000 — with no more than $23,000 in subsidized loans. 

It’s important to note that your school determines the loan type and actual loan amount you are eligible to receive each academic year. 

Loan eligibility requirements: Do you qualify for a Stafford Loan?

Nearly every U.S. citizen qualifies for a Stafford Loan. However, there are some limitations.

Stafford Loan eligibility requirements include: 

  • You must be enrolled at least half-time at a school that participates in the Direct Loan Program. 
  • You can't be in default for any existing federal student loans.  
  • If you can demonstrate financial need, you may be eligible for a subsidized Stafford Loan, which means the government will cover your interest payments while you’re in school. This loan is only available to undergraduate students.  
  • If you cannot demonstrate financial need, you may still qualify for an unsubsidized Stafford Loan. This loan is available to both undergraduate and graduate students. 

Applying for a Stafford Loan

​To apply for a Stafford Loan, all you have to do is fill out and send in your free application for federal student aid (FAFSA) form. You can complete the FAFSA online here.

If you're approved for a Stafford Loan, your college's financial aid office will let you know the total amount of federal loans you will receive, as well as the disbursement schedule for the loan. 

Before your loans can be used, you have to complete entrance counseling, which ensures you understand interest rates, loan repayment plans, and strategies for avoiding default. Entrance counseling should take you about 30 minutes. 

After completing entrance counseling, the final step is signing the Master Promissory Note, which is a contract stating you will repay your Stafford loan in full, plus any interest accrued, plus loan fees.

Still need more money for college?

If you’ve exhausted all of your federal financial aid options and you still need more money to pay for college, you may want to consider applying for a private student loan. And if you’re not sure where to start, download our guide  Private Student Loans 101, to learn more about our top lenders. 

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