Student Loans

What Is a Stafford Loan & How Do You Get One?

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Figuring out how to pay for college can be confusing. Not everyone can pay cash for their education. If you plan on taking out student loans to help pay for school, a great place to start is with a subsidized or unsubsidized federal student loan, commonly referred to as a Stafford Loan or a Direct Stafford Loan.

What are stafford loans?

Stafford Loans are a type of federal financial aid run by the U.S. Department of Education. A Stafford Loan is one of the few types of loans you apply for that doesn’t require your credit score because the federal government guarantees the loan in case a borrower defaults. The proceeds from the loans can be used to help pay for education at a four-year college or university, a community college or a trade school.

A subsidized vs. unsubsidized stafford loan

Both subsidized and unsubsidized loans are very similar with three major exceptions. Subsidized loans do not incur interest while you’re attending school at least half time or during the six month grace period before repayment begins. Unsubsidized loans incur interest the whole time. The basis for which type of loan you’re offered is your financial need. If you have financial need, you may qualify for subsidized loans. However, if you don’t, you’ll be offered unsubsidized loans. The other major difference is subsidized loans can only be used for undergraduate studies, unlike unsubsidized loans which can be used for graduate and professional degrees.

How much can you borrow?

For subsidized loans, you can borrow the following amounts during each year of study, subject to a $23,000 total cap:

Borrowing Limits – Subsidized Stafford Loans
School Year Annual Loan Limit
First year $3,500
Second year  $4,500
Third year  $5,500


Unsubsidized loan amounts differ depending on whether you are a dependent student or an independent student. If your parents do not qualify for PLUS loans for undergraduate education, you may borrow the independent student amount. The limits below are for total amount of Stafford Loans including any subsidized loans you may take out.

Borrowing Limits – Unsubsidized Stafford Loans
School Year Annual Loan Limit (Dependent)  Annual Loan Limit (Independent)
First year $5,500  $9,500
Second year  $6,500  $10,500
Third year  $7,500  $12,500
Graduate year  $20,500  $20,500


The maximum amount of Stafford Loans you can take out is $31,000 as a dependent student, $57,500 for an independent student and $138,500 for graduate or professional students which includes undergraduate loan amounts.

Other important information

Are you eligible?

In order to qualify for a Stafford Loan, you must fill out a Free Application for Federal Student Aid (FAFSA) form. You must also be enrolled at least half time in a school that participates in the Direct Loan Program and be working toward a degree or a certificate.


There are many repayment terms for Stafford Loans that range from as short as 10 years to as long as 25 years. While you’re enrolled in school at least half time, you do not have to make payments on your loans. Additionally, six months after you quit attending school half time you are offered a grace period during which you do not have to make payments.

Once you start making payments, the standard repayment plan is a 10-year repayment period with fixed monthly payments. However, there are other programs you may be eligible for such as the extended repayment plan, which can take as long as 25 years, or the income-based repayment plan. For more details on all the repayment options and to figure out which you qualify for, visit the Federal Student Aid website. Remember, it is free to apply for federal repayment plans but that there are student loan scams out there that will attempt to charge you for these free services.

Interest rates & fees

The current interest rate for direct subsidized and unsubsidized loans is 3.76 percent if funds are disbursed before July 1, 2017. For direct unsubsidized graduate or professional loans disbursed before the same date, the rate is 5.31 percent.

Additionally, there is a loan fee for all Stafford Loans, both subsidized and unsubsidized. The current fee is 1.069 percent of the loan value for loans disbursed before October 1, 2017 and is deducted from each disbursement.

Need more money for college?

If a Stafford Loan don’t provide enough money to attend the college or university of your choice, you may have to consider private student loans. Private student loans are not administered through a single program, so the interest rates and other terms may vary from lender to lender. The way to find the best private student loans is by comparing multiple student loan quotes, which you can do quickly on LendingTree.