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. Kimberly says on July 20, 2010 at 9:23 pm:

    thanks that helps lots.

    Reply To This Comment
  2. Omar says on July 20, 2010 at 5:40 pm:

    Very helpful thanks

    Reply To This Comment
  3. LaSindia says on July 20, 2010 at 12:06 am:

    Very informational. i canme to ask a question but there is no need now after i read the contents on this page

    Reply To This Comment
  4. Danielle says on July 19, 2010 at 1:20 am:

    my questions were answered!

    Reply To This Comment
  5. marqueta says on July 18, 2010 at 2:20 pm:

    Lots of people need the help of loans so this was very informative

    Reply To This Comment
  6. Alisha says on July 16, 2010 at 3:00 pm:

    I always get confused between subsidized and unsubsidized loans. That cleared it up for me.

    Reply To This Comment
  7. tito says on July 16, 2010 at 2:16 pm:

    good to know

    Reply To This Comment
  8. Vanessa says on July 16, 2010 at 11:04 am:

    Very helpful!!

    Reply To This Comment
  9. ANAIS says on July 15, 2010 at 11:26 pm:


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  10. ANAIS says on July 15, 2010 at 11:23 pm:


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  11. Sarah says on July 15, 2010 at 10:00 pm:

    Good information for parents and students!

    Reply To This Comment
  12. Crystal says on July 15, 2010 at 12:20 pm:

    interesting stuff

    Reply To This Comment
  13. Vanessa says on July 13, 2010 at 10:32 pm:

    This was very helpful. Answered my main questions. Thank you

    Reply To This Comment
  14. Garry says on July 12, 2010 at 3:34 pm:


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  15. Janette says on July 11, 2010 at 11:17 pm:

    very helpful. learned the differences of loans. had no idea about this.

    Reply To This Comment
  16. trina says on July 11, 2010 at 4:10 pm:

    Good information

    Reply To This Comment
  17. katie says on July 10, 2010 at 2:55 pm:

    wow. thanks.

    Reply To This Comment
  18. Jamiahus says on July 9, 2010 at 8:08 pm:

    Very helpfull

    Reply To This Comment
  19. ali says on July 8, 2010 at 12:53 am:


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  20. Karin says on July 7, 2010 at 2:01 pm:

    Thanks that was a help…

    Reply To This Comment
  21. Sabrina says on July 6, 2010 at 4:52 pm:

    that was helpful thanks

    Reply To This Comment
  22. nathalie says on July 3, 2010 at 9:12 pm:


    Reply To This Comment
  23. Tahquan says on July 3, 2010 at 6:21 pm:

    it very insightful and helps you learn about loans

    Reply To This Comment
  24. bre says on July 2, 2010 at 8:27 pm:

    its very helpful wow !

    Reply To This Comment
  25. QIHUI says on July 1, 2010 at 10:44 pm:


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