Stafford Loans: The Basics

Learn more about this federal aid and whether it’s right for you.

Stafford Loans are one of the most common types of college financial aid funded by the federal government. If you’re concerned about how you’ll pay for a college degree at the community college or 4-year college or university you’re interested in, a Stafford Loan can help you cover the costs of your college education.

Like all federal aid, you apply for a Stafford Loan by completing the Free Application for Federal Student Aid (FAFSA) form. This form asks you about your family’s financial situation in order to determine how much money for college you can pay, and how much financial need you have for scholarships, grants and college loans.

When you are accepted into a college or university, you will receive a financial aid award letter, which details the amount of aid you’ve received, breaking down the amounts for all of the college loans, scholarships and grants you’ve been awarded. If the Stafford Loan is offered to you, you’ll want to learn more about the terms and conditions of this loan before you decide whether to accept it.

What Is the Stafford Loan?

The Stafford loan offers a fixed interest rate that is often lower than a college student would find on a private loan. These college loans come in two forms: subsidized and unsubsidized.

Subsidized loans are awarded based on financial need, and the federal government will pay any accrued interest while you’re in school. The financial aid office of your loan will ask you to choose a lender, who will then require that you fill out a loan application. Once the loan is approved, the lender will send the money to your school.

On unsubsidized loans, you’re responsible for paying any interest, and this interest starts accruing as soon as you receive your loan. These loans do not require you to prove financial need to receive them.

Who Qualifies for the Stafford Loan?

If you are a student pursuing your college education or a graduate program, like a masters degree, you could qualify for this federal aid. It is designed to supplement a student’s personal college money, as well as work-study programs, scholarships and grants.

To be eligible for this loan, you must be a US citizen or eligible non-citizen who is enrolled in school on at least a part-time basis, and you must not currently have another education loan in default. You’ll receive your loan money for college in at least two installments per school year.

How Are Stafford Loans Repaid?

Once you graduate from college, leave school or take classes less than part-time, your loan kicks in. Fortunately, you have a grace period of six months with the Stafford Loan before you have to start repaying that money for college.

How you repay your loan depends on the type of Stafford Loan you have. These loans have two sources of funding: College financial aid either comes directly from the Department of Education, if your school participates in the Federal Direct Loan Program, or from a private lender, if your school instead participates in the Federal Family Education Loan (FFEL) Program. So if you have a FFEL loan, you’ll pay back the private lender. If you have a Direct Loan, you’ll pay back the Department of Education.

Stafford Loans Tips & Tactics

• If you’re in the FFEL plan, you’ll be asked to choose a lender. Your college’s financial aid office can give you information on the school’s preferred lenders to compare student loans as well as help on evaluating each loan’s interest rates, terms and conditions.
• You are able to get a loan deferment or forbearance in some cases. If you think you won’t be able to pay back your loan in coming months, be sure to talk to your lender and financial aid office to determine the best course of action.
• Concerned about keeping track of multiple payment schedules for all of your student loans? Consider consolidating your loans into one monthly payment with one lender. Consolidating your loans can lower your monthly payment and make paying for college much easier, but it can increase the overall cost of your loan because the interest will be higher.

Related Guide to Student Loans and Borrowing Articles

Borrowing Basics
Borrowing Tips
How to Keep Debt Low
Different Types of Loans
Managing Your Loan Information
Subsidized Loans vs. Unsubsidized Loans
Options for Paying for College: Federal Financial Aid vs. Private Loans

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