Federal Stafford Loans

There are many kinds of financial aid available to students in need of assistance with the high cost of a college education. In addition to grants and scholarships, there are several types of federal loans worth considering. A Stafford loan is a low-interest loan awarded by the U.S. Department of Education to undergraduate or graduate students pursuing professional degrees. It doesn’t require a credit check to apply and is available to a wide range of students, including those who need student loans for bad credit. Unlike grants and scholarships, Stafford loans must be re-paid by the student, even if they do not graduate.

Subsidized vs. Unsubsidized Stafford Loans

A subsidized Stafford loan is one where the U.S. Department of Education pays the interest on the loan during specific times, for instance, while the student is still in school.

In order to qualify for a subsidized loan, a student must provide proof of their financial need. An unsubsidized Stafford loan is one where the student re-pays the interest in addition to the amount borrowed.

Facts about Stafford Loans

  • In your first year, borrow up to $3,500, in your second year, borrow up to $4,500 and in your third year, borrow up to $5,500
  • Fixed interest rate of 6.8%
  • Fee for the loan is no more than 4%
  • Your school will give you the loan money
  • Enjoy a 6 month grace period after you graduate, go to half-time status or stop attending school to re-pay your loan

Stafford Loan Programs

1. William D. Ford Direct Loan (Direct Loan) Program

The William D. Ford Direct Loan program is referred to as a Direct Loan and the loan is borrowed from and repaid directly to the Department of Education. Direct Loans can be subsidized or unsubsidized.

2. Federal Family Education Loan (FFEL) Program

The Federal Family Education Loan is referred to as a FFEL loan. The federal government guarantees FFEL loans but private lenders provide the funds. FFELs are available as subsidized or unsubsidized loans and are repaid directly to the providing lender or bank.

*Update: As of 7/1/2010, loans are no longer being made under the FFEL program. All NEW loans (Stafford, PLUS, and Consolidation Loans) will be made under the Direct Loan Program.

Stafford Loan Providers

Since only about 20% of schools offer loans through the federal government Direct Loan program, they will have a list of providers for you to choose from. Read the information regarding the various loans offered through the private lenders since they will offer a variety of benefits, some of which you will qualify for, some not.