Stafford Loans, in Plain English | 02.22.10

Posted in FAFSA, Financial Aid, Stafford Loan By Student Loan Network Staff

Stafford loanNow that it’s FAFSA time, I thought that the second installment of this blog should focus on a piece of federal aid that many students receive as part of their award: the federal Stafford loan. Read on to find answers to questions like: “What is it?”, “What does it do for me?”, and “What is it going to cost me?”

What is a federal Stafford loan? The Stafford loan is a type of financial aid granted from the United States government to students who file a Free Application for Federal Student Aid (FAFSA) and show demonstrated financial need. The Stafford Loan program is an evolution of the Guaranteed Student Loan Program, established in 1965, and was named after a Republican senator from Vermont who was highly honored and respected for his work on higher education reform.

The benefits of a Stafford loan. First of all, a Stafford loan is one of the best types of student loans you can get because they have fixed, relatively low interest rates — often much lower than that of the private student loan industry. Due to the fixed interest (meaning it doesn’t change over the life of the loan), there is no chance of the annual percentage rate (APR) suddenly spiking due to the economy; this should be taken a great measure of financial safety, as many students, mortgage holders, and other loan recipients have had to deal with some crazy interest fluctuations in the past two years as a result of the economic recession. The bottom line though is that the interest that is calculated on this loan will increase at the same rate through your entire repayment period — no sudden jumps of huge amounts of interest to pay off, unless you miss payments or go into default on the loan.

What does a Stafford loan end up costing? To answer this question accurately, you first need to know that Stafford loans come in two flavors: unsubsidized and subsidized. Here is a super quick reference chart for the differences between the two:

    Unsubsidized Stafford Loan

  • Usually higher interest than subsidized, new loans currently at 6.8% fixed for 2010-2011
  • Interest accrues while you are in school, and after you graduate
    Subsidized Stafford Loan

  • Usually lower interest than unsubsidized, new loans currently at 4.5% fixed for 2010-2011
  • Interest does not accrue while you are in school, or during your 6 month grace period after graduation — interest only starts to build once your loan goes into “repayment” status

To sum this information up, you pay less overall with a subsidized Stafford loan than an unsubsidized one over the life of the loan. One other nice thing about this type of federal loan is the fact that it has a generous repayment period and lots of different repayment options that will NOT overwhelm you once you graduate. The same usually cannot be said for a private student loan, which 99% of the time has a much higher interest rate (often variable) and whose lenders generally are much less flexible about repayment options.

ScholarshipPoints Code: STAFFORD2010

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172 Responses to “Stafford Loans, in Plain English”

  1. MD says on August 12, 2011 at 12:33 am:

    This is great and all but it doesn’t say anything about income limits. I understand it’s based off the FAFSA info but to give you an example… my daughter got subsidized loans for the first two year and now they tell her she can only get unsubsidized. Our income hasn’t changed but maybe their limits have. I want to know how this is determined because it’s driving us crazy

    Reply To This Comment
    • Student Loan Guru says on September 2, 2011 at 10:33 am:

      @MD- There are no income limits for Stafford loan. Eligibility is calculated based on your Estimated Family Contribution. I don’t know the exact formula used, but it takes into account a variety of factors including income, savings, number of dependents, number of students in college, time of year you submit your FAFSA, etc. Being awarded less could be for a number of reasons, not just changes in income.

      Reply To This Comment
  2. Rogerfederer says on January 31, 2011 at 7:30 am:

    This is Amazing information .I am very thankfull to you.Thankyou soo much.. :).

    Reply To This Comment
  3. Myresha McGee says on December 1, 2010 at 2:04 am:

    This is some very informity and useful information. Thank you. Myresha McGee

    Reply To This Comment
  4. Michael D'Orazio says on August 18, 2010 at 10:58 am:

    I got a 148 subsidized loan according to the letter I got informing me that I had recieved my loan but it doesnt tell me how much the loan is. I know after my grants I owed 1800dollars to the college and I had close to 900 credit at the bookstore and Im sure the loan covered the 1800 dollars….some papers I look at say 9500 dollars and some say 3500…so Im not too sure…if it is in fact 3500 then I should get close to 1000 dollars back in my refund check…I just think it should be a little more informative about how much the loan is considering Im going to have to pay this money back

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  5. Suzan says on August 12, 2010 at 7:08 am:

    these are very useful information!

    Reply To This Comment
  6. D MIXON says on August 11, 2010 at 8:30 pm:


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  7. Kimberly says on August 11, 2010 at 10:50 am:

    Great Info!

    Reply To This Comment
  8. aaron says on August 11, 2010 at 2:11 am:

    This is really some great information

    Reply To This Comment
  9. sara says on August 10, 2010 at 6:35 pm:


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  10. Alex says on August 10, 2010 at 3:50 am:

    Good info here.

    Reply To This Comment
  11. linda says on August 9, 2010 at 10:25 pm:


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  12. Jennifer says on August 9, 2010 at 6:48 pm:

    Didn't even know about this.This will be very helpful

    Reply To This Comment
  13. KKZ says on August 9, 2010 at 6:19 pm:

    FAFSA is pretty legit….

    Reply To This Comment

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