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. Patrick says on August 8, 2010 at 4:49 pm:

    Very helpful. I didn't know the difference until I read this.

    Reply To This Comment
  2. Cuijino says on August 6, 2010 at 2:41 am:


    Reply To This Comment
  3. Tabitha says on August 5, 2010 at 6:51 pm:

    Very helpful

    Reply To This Comment
  4. Matt-a-tat-tat says on August 5, 2010 at 11:24 am:

    thaaank ya my good sir

    Reply To This Comment
  5. KATELIN says on August 4, 2010 at 2:30 pm:


    Reply To This Comment
  6. Jeffy Domer says on August 4, 2010 at 1:10 pm:

    Coool Beans

    Reply To This Comment
  7. faith tabanas says on August 3, 2010 at 9:39 pm:

    this is a great information to know, it has lots of detailed and very useful for future purposes

    Reply To This Comment
  8. angel says on August 3, 2010 at 7:39 pm:


    Reply To This Comment
  9. Gwen says on August 3, 2010 at 7:05 pm:

    Excellent info

    Reply To This Comment
  10. Meg says on August 3, 2010 at 1:28 pm:

    Good info. Goo to know

    Reply To This Comment
  11. Tonya says on August 3, 2010 at 7:46 am:

    I didnt really understand what the difference between subsidized an unsubsidized ment so this really helped me understand it better.

    Reply To This Comment
  12. krystle says on August 3, 2010 at 2:28 am:

    good to know

    Reply To This Comment
  13. carina says on August 2, 2010 at 10:25 pm:

    great info!

    Reply To This Comment
  14. April says on August 2, 2010 at 9:58 pm:

    this isn't bad info to know about

    Reply To This Comment
  15. vilma says on July 31, 2010 at 8:27 am:

    thanks this is helpful

    Reply To This Comment
  16. fernanda says on July 30, 2010 at 7:45 pm:

    Thanks, very helpful !

    Reply To This Comment
  17. Lori says on July 30, 2010 at 10:10 am:

    very helpful

    Reply To This Comment
  18. Awilda says on July 30, 2010 at 2:15 am:

    The information has been very helpful.

    Reply To This Comment
  19. Stephanie says on July 30, 2010 at 12:14 am:


    Reply To This Comment
  20. Ioana says on July 28, 2010 at 5:43 pm:

    this was very informative!

    Reply To This Comment
  21. monica says on July 26, 2010 at 2:58 am:

    cool beans.

    Reply To This Comment
  22. vy nguyen says on July 21, 2010 at 10:04 pm:

    thank, i crazy about find out what sub and unsub load

    Reply To This Comment
  23. xramunee says on July 21, 2010 at 5:46 pm:

    thanksss for the info.

    Reply To This Comment
  24. C.J says on July 21, 2010 at 5:13 pm:

    They are very generous thats awesome

    Reply To This Comment
  25. Anjanie says on July 21, 2010 at 3:08 pm:

    Helpful information.

    Reply To This Comment

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