Federal Stafford Loan

What is a Stafford Loan ?

Graduate, undergraduate and professional college and university students who are enrolled at least half-time in school are eligible for Stafford loans, a type of federal student loan with a fixed interest rate. These loans are disbursed through the William D. Ford Federal Direct Loan Program and are also known as direct loans.

Beginning on July 1, 2010, all new federal student loans under the William D. Ford Federal Direct Loan Program were issued directly by the U.S. Department of Education. The same loans are referred to as direct loans and Stafford loans.

They are meant to enhance any personal or family resources already available to cover the costs of higher education, such as work-study, grants, and scholarships. Tuition, lodging & board, books, and other education-related expenses are all eligible for reimbursement with federal direct loans.

Most students' financial assistance packages are built around direct Stafford loans, which are provided through the William D. Ford Federal Direct Loan program. Regardless of their financial need, students who use Stafford loans can often borrow a sizeable sum of money for both undergraduate and graduate studies.

There are two distinct forms of Stafford Loans if you're researching them. Unsubsidized Stafford Loan and Subsidized Stafford Loan are only available to undergraduate students (available to undergraduates and graduate students).

Depending on whether they are subsidized or unsubsidized, Stafford loans might have different interest rates and maturities, but in either case, they are one of the greatest options for borrowing money to cover college expenses.

Key Facts of Federal Stafford Loan

  • The Department of Education provides undergraduate and graduate students with direct Stafford loans, which are direct loans.
  • Depending on whether you are a dependent and what year of school you are in, the loans have maximum borrowing limitations.
  • Subsidized and unsubsidized Stafford loans are separated.
  • There are eight different repayment plans available.

Federal Stafford Loan Additional Information :

Max Loan Length

30 years, depending upon amount borrowed and repayment plan chosen

Interest Rate

Variable, does not exceed 8.25%

Max Loan Amount

up to $ 20,500 annually

Payment Frequency


Prepayment Penalties



Up to 4% of the loan

How Does a Direct Stafford Loan Work ?

For students who qualify, low-interest Direct Stafford Loans from the William D. Ford Federal Direct Loan Program can help with the expense of higher education at a four-year institution, community college, or trade, career, or technical school. At participating institutions, eligible students can borrow directly from the US Department of Education.

Undergraduate and graduate students can apply for Stafford Loans, which come in the form of Direct Stafford Loans issued by the US Department of Education. The U.S. Department of Education will receive repayment for a Federal Direct Stafford Loan from you.

Students who are enrolled at least half-time in college can borrow low-cost, federally guaranteed funds through Stafford loans, now known as direct loans. The amount of borrowing is also influenced by the student's dependent status.

Prior to applying for a loan, students must first be accepted into a school that is authorized to accept federal loans and finish the Free Application for Federal Student Aid (FAFSA). You must be enrolled in a course offered by a recognized institution in order to make use of any federal loans to finance your education. Check this website to discover if the college you're thinking about is approved for federal loans.

Most federal student loans do not require a credit check, the interest rates on Stafford loans are typically cheaper than those on private loans, and payments doesn't start until the student graduates from college or drops below a half-time load.

Types of Stafford Loan

The following loan types are included in direct Stafford Loans:

1) Subsidized Stafford Loan :
Based on your financial need as demonstrated by the FAFSA information you provide, a discounted loan will be given to you. If you qualify for a subsidized Stafford loan, you won't be charged interest while you're enrolled in school at least half-time, during the grace period that lasts up to six months after you stop being enrolled, or during some specified deferral periods. During certain times, the interest is paid by the federal government.

2) Unsubsidized Stafford Loan:
A loan that is unsubsidized is not given out based on need. But the FAFSA is still required for applications. You will be charged interest on unsubsidized loans from the time they are disbursed until they are repaid in full. While in school and throughout any grace or deferment period, you may opt to postpone paying interest. The interest will be capitalized, nevertheless, if you permit it to accrue (accumulate) throughout these times. This implies that interest will be added to the loan's principle, and subsequent interest will be calculated using the larger amount.

Who is Eligible for a Stafford Loan ?

Stafford Loans are typically available to students who are eligible for federal student aid. In order to be qualified for a Stafford Loan, the borrower must:
  • Be a citizen, national, or eligible non-citizen of the United States.
  • Be enrolled at least half-time in an eligible degree or certificate-granting program.
  • Possess a high school diploma or an equivalent qualification.
  • Not in arrears on any federal student loans already in existence.
  • Meet the standards for general eligibility for federal student aid.

The amount that can be borrowed for both subsidized and unsubsidized loans (as well as other financial aid) is decided by the borrower's school based on the cost of attendance and any financial aid a student receives.

Stafford Loan Borrowing Limits

Stafford loan limits are determined by two factors:
  • Are you a dependent ?
  • What year are you in school ?
The charts below show the maximum loan amounts.

Maximum Annual Amounts





(0-29 credits)

$5,500 ($3,500 subsidized, $2,000 unsubsidized)

$9,500 ($3,500 subsidized, $6,000 unsubsidized)


(29.1-59 credits)

$6,500 ($4,500 subsidized, $2,000 unsubsidized) 

$10,500 ($4,500 subsidized, $6,000 unsubsidized) 

Third-year and beyond 

(59.1+ credits)

$7,500 ($5,500 subsidized, $2,000 unsubsidized) 

$12,500 ($5,500 subsidized, $7,000 unsubsidized) 


Not applicable

$20,500 (all unsubsidized)


How Much is Stafford Loans ?

Stafford loans have a lifetime limit that is currently set at $31,000 for undergraduates who are dependent, $57,500 for undergraduates who are independent, and $138,500 for graduate students.

Maximum Loan Amounts for a Lifetime :

Aggregate maximum subsidized loan limit

Aggregate maximum unsubsidized loan limit


Dependent students 




Independent students




Graduate students 




30 years is the maximum loan length, based on the amount borrowed and the repayment option selected. The Direct programs provide a selection of repayment options.

Note :
Students who are claimed as dependents on another person's taxes are referred to as dependents. Students who are independent are those who are not claimed as a dependent on another person's tax return.

What is the Interest Rate on Stafford Loans ?

Information on the current interest rates for federal student loans is regularly updated and maintained on the Federal Student Aid website. The rates charged will differ depending on the type of loan and borrower, therefore it's vital to check it occasionally.

The rate for direct subsidized and unsubsidized undergraduate loans is 4.99% and the rate for graduate and professional programs is 6.54% for loans with disbursement after July 1, 2022 and before July 1, 2023, 

Stafford Loan Fees

A Stafford loan also has a loan fee in addition to interest. The loan fee is 1.057% of the total loan amount for loans with a first disbursement date on or after October 1, 2020, but prior to October 1, 2023. Each check for a disbursement is partially subtracted to cover this cost.

How Does the Stafford Loan Interest Rates Work ?

Aside from eligibility requirements and loan amounts, the main distinction between the two types of Federal Stafford Loans is how interest is handled. Every year on July 1st, the interest rates on new federal student loans are revised.

Government agencies cover the interest on subsidized Stafford loans while borrowers are enrolled in classes or have their payments deferred. Any unpaid interest on an unsubsidized Stafford loan is added to the loan total and is paid for by the student.

Direct Stafford Loan Repaying

All Stafford Loans must be repaid six months after a student graduates, leaves school, or drops below a half-time load. Interest does not accrue on subsidized loans during this grace period of six months, but it does on unsubsidized loan amounts. The following choices are available for repayment plans for Stafford Loans :

Standard :
Ten years of fixed payments.

Extended :
Fixed or progressive payments with a 30 year payoff goal are both acceptable. There must be at least $31,000 in direct loans for borrowers.

Graduated :
For a period of ten years, payments start out lower and then steadily rise over time (often every two years).

Income-driven :
Payments are dependent on your income and often range from 10% to 20%. Payments, however, may never be higher than what a person would have had to pay under the usual repayment plan. Every year, the payment amount will be revised in accordance with family size and discretionary income.

How to Apply for Stafford Loan ?

Fill out the Free Application for Federal Student Aid (FAFSA) if you want to apply for Direct Stafford Loans. Every year on October 1st, the submission period opens.

The fastest and easiest way to apply is online using the FAFSA at website. You can also obtain a paper FAFSA from your high school, local library, post-secondary institution, or by calling the Federal Student Aid Information Center at 1-800-4-FED-AID (1-800-433-3243). Callers with hearing impairments can use TTY by dialing 1-847-688-2567.

If you submitted an FAFSA for federal student aid during the previous academic year, you can probably do so again the following year. You will simply need to amend any information that has changed and enter a few new responses if you use a Renewal FAFSA.

You must submit an FAFSA form whether you're looking for an unsubsidized or subsidized Stafford Loan. The FAFSA form is sent to your school after completion, and they will let you know if you qualify for loans and your lending alternatives. Before any money can be dispersed, you must sign a master promissory note when you accept the loan.

Frequently Asked Questions (FAQs)

What is the unsubsidized Stafford loan?
A Stafford loan that is unsubsidized means that the government will not pay your interest while you are in school, during the grace period, or while you are applying for a deferral. The government pays your loan interest while you're in school with subsidized loans, a grace period, or a deferment.

What qualifies as a Stafford Loan?
Federal Stafford loans come in two varieties, subsidized, where the government covers the interest while you're in school, and unsubsidized, where you are responsible for paying the entire interest.

A Stafford Loan is eligible for forgiveness?
This includes all Direct federal student loans, both subsidized and unsubsidized, as well as Direct Stafford Loans. Parent Plus and Graduate Loans are also eligible for the assistance under the Direct program.

What is the difference between direct loan and Stafford loan?
The main distinction between a Stafford Loan and a Direct Loan is the lending institution. A bank, savings and loan, or credit union is the lender of a Stafford Loan, whereas the federal government is the lender of a Direct Loan.

Are direct Stafford loans good choice?
Your college education can be afforded by taking out Stafford student loans. They should generally be your first option before a PLUS loan or a private student loan because they have relatively low, fixed interest rates.

What is the annual maximum amount of Stafford Loans?
Annual Maximum Loan Amount is depending on your grade level, your status as a dependent or independent student, your status as an undergraduate or a graduate student, and your total cost of attendance.

Do Stafford loans need repayment?
If you have more than $31,000 in federal student loans, you may be eligible for a longer payback term than the typical 10 years for Stafford Loans. After you graduate, leave school, or reduce your attendance to less than half-time, payments are required.

Can I pay for my living expenses with a Stafford Loan?
You are not permitted to use student loans, obtained from either the U.S. Department of Education or private lenders, for actual "living expenses." You may not utilize the money from your student loans for the following expenses: Buying an automobile or paying for repairs on a vehicle you don't need for school.
How many years are Direct Stafford loans?
The standard repayment period for Stafford Loans is 10 years, but you can secure a longer repayment term if you have more than $30,000 in federal student loans. Payments are due after you graduate, leave school, or change your enrollment status to less than half-time.

What Takes Place After You are Approved for direct Stafford Loan?
Your college's financial aid office will receive funds from your subsidized or unsubsidized loan for use in paying for tuition, fees, accommodation and board, as well as any necessary expenses, such as purchasing tools or technology for your program of study.

If you are a first-year undergraduate student borrowing a Stafford Loan for the first time, you might have to wait 30 days from the start of your enrollment term before you receive your first disbursement. You can find out if this is how things are done at your school from the financial aid office there.

The loan servicer will get in touch with you after the loan is received. If there are any monies left over, you will be given the remainder by cheque, cash, debit card, or EFT. You must utilize your return to cover textbooks, supplies, and other direct or indirect costs associated with your education. Alternately, and maybe most strongly advised, you could return any unused funds, reducing the total amount you borrowed (and your monthly payments once you leave school).