What is a Stafford loan?

A Stafford loan is a student loan given by the US Federal government for college and university students. It is referred to as the Federal Direct Loan program[i]. It is a financial aid given to deserving students to pursue an undergraduate or post-graduate degree. The loan disbursed would cover tuition fees, board and room charges, book costs and other expenses related to education.

This is a federally guaranteed loan, which means that the loan is secured by the Government of the United States.

Types of Stafford loans

There are two types of Stafford loans – subsidized and unsubsidized.

Subsidized loans are given for the needy. Those who are financially weak and in need of money are given subsidized loans. This loan is given after assessing the need of the student based on financial circumstances. The interest for this loan is subsidized, which means students need not pay any interest. The loan need not be paid during the study. It can be paid after they either graduate or dropout.

A limited number of subsidized loans are available. Other students can avail of unsubsidized loans. These loans, however, require interest to be paid. But the interest need not be paid until the student completed the course of study or dropouts. Many easy repayment options are available.

Loan amount and interest

One of the factors determining the loan amount which can be disbursed is whether the student is independent or dependent on parents. The other factor is the year of study. Based on these factors, Stafford loans are given up to a maximum of:

  • Freshman year: Dependent students can get up to $5,500 and independent students can get up to $9,500.
  • Sophomore: Dependent – $6,500 and independent – $10,500.
  • Junior and later: Dependent – $7,500 and independent – $12,500.
  • Graduate or Professional degree:$20,500 per year irrespective of dependency status.

There is also a lifetime limit, which is $31,000 for independent students, $57,500 for dependent students and $138,500 for graduate students.

The present interest rate[ii] on Stafford loans (July 1st 2018-Jul 1st 2019) is 5.05% for undergraduate and 6.6% graduate students. There is also a 1.5% loan fee to be paid.


Like most other student loan programs, the first step to get a Stafford loan is to apply for FAFSA. Free Application for Federal Student Aid (FAFSA) is an application[iii] which students have to submit to determine their eligibility for student loans or assistance from federal and state governments and colleges. While applying for FAFSA the student has to reveal all details of assets, loans, and sources of income. The details of the college applied also need to be indicated in the application – this can be changed later. Based on an analysis, a report is prepared which is used to decide whether the student is eligible for a subsidized Stafford loan or not.


Once the loan is approved, it is given usually in two installments, at the start of each of the two semesters for the year. The money is directly given to the college/university. The loan is used to pay for education-related expenses like tuition fee, boarding, and other academic fees.

A Stafford loan is a federal government financial assistance given to undergraduate and post-graduate students to meet their educational expenses. These loans can be repaid on completion of the study.

[i] https://www.investopedia.com/terms/s/stafford-loan.asp

[ii] https://studentaid.ed.gov/sa/types/loans/interest-rates

[iii] https://www.investopedia.com/terms/f/federal-application-of-student-aid-fafsa.asp