Ultimate Guide to Federal Stafford Loans

June 23, 20220


It’s no secret that student loans can be a huge burden. The good news is, that there are different types of student loans to choose from, and one of the most popular options is a Federal Stafford loan. Read on for a comprehensive guide to this loan program and how it could help fund your education!

What is a Federal Stafford Loan?

A Federal Stafford Loan is a type of student loan that is available to students enrolled at least half-time who need additional funding to pay for education-related expenses. These loans are offered through the federal government, so they have more flexible repayment plans than private loans.

Stafford loans are federal loans given to undergraduate and graduate students.

Stafford loans are available to undergraduate, graduate, and professional students. If you are enrolled in a post-baccalaureate program or taking classes that do not lead to a degree, you may also qualify for a Stafford loan.

If you have dependent children who go to school full-time, you can take out an additional loan on their behalf with the same interest rate as your own student loan.

Subsidized Stafford Loans vs. Unsubsidized Stafford Loans

A subsidized Stafford loan is one that the federal government pays your interest while you’re in school. The government is on the hook to pay it when you’re in school, so you don’t have to worry about paying it yourself.

Unsubsidized Stafford loans are awarded based on financial need and without regard for whether or not the student has demonstrated any financial need at all—students with high-paying parents can still get an unsubsidized loan, even though they won’t have their interest paid by Uncle Sam during school.

Who’s eligible for subsidized and unsubsidized Stafford Loans?

Who’s eligible for subsidized and unsubsidized Stafford Loans?

There are several factors that go into determining whether or not you are eligible for a subsidized or unsubsidized Stafford Loan. In general, if you are an undergraduate student and you have an annual adjusted gross income of $23,000 or less per year (or $46,125 or less if married) then you should be eligible for a subsidized loan. If your annual gross income exceeds these amounts then you will most likely be required to take out an unsubsidized student loan instead.

As with all federal aid programs, there is a strict timeline on how long someone can receive assistance from them; however, this does not mean that once the time period has expired that it cannot be renewed again. For example: let’s say your eligibility ended in May but now it’s October and because of unforeseen circumstances like losing their job they no longer qualify now but would like more assistance so they reapply through their lender which would automatically extend their eligibility back up until June 1st (but not past).

How much can I borrow with a Stafford Loan?

In general, the amount you can borrow with a Stafford Loan depends on your year in school. If you’re a dependent student, that means your parents are still paying for at least some of your tuition and living expenses—you’ll be eligible to borrow up to $5,500 per year (if attending full-time). If you’re an independent student—meaning that neither parent is claiming you as a tax dependent—your yearly borrowing limit increases by $2,000 annually: $6,500 if attending full-time.

A few other factors may change how much money you qualify for:

  • If there’s no chance of defaulting on the loan (for example, because the borrower has good credit), they may receive higher amounts than usual.
  • The amount will go up slightly depending on inflation adjustments each year (for example, with this current generation).

How do I repay my Stafford Loan?

When you’re ready to begin repayment, you’ll receive a bill from the U.S. Department of Education every six months for the remainder of your loan.

You can choose from several repayment options:

  • Standard Repayment Plan (SRP)
  • Extended Repayment Plan (ERP)
  • Graduated Repayment Plan (GRAD)
  • Income-Based Repayment Plan (IBR) – Pay As You Earn’ Option: Forgives remaining debt after 20 years of qualifying payments and partial forgiveness after five years if eligible based on income

What is the Federal Stafford Loan interest rate?

The interest rate on your Federal Stafford Loan is based on the 10-year Treasury Note. The interest rates are fixed for the life of your loan, and they are set each July 1 and December 1. Rates may change without notice, but under certain circumstances, you can switch to another repayment plan with a lower monthly payment if your current plans’ interest rates increase.

The rate you choose depends on how long you plan to be in school:

  • If it’s less than one year (eg., a semester), you’ll pay 5% or 6% APR for subsidized loans; 7% or 8% APR for unsubsidized loans; or 9% or 10% APR for PLUS loans. You can also choose deferment options that won’t add any additional fees above what’s already built into your principal balance due at graduation (see below).
  • If it’s more than one year but less than four years (eg., two years), then you’ll pay either 6%, 7%, 8%, 9%, or 10%. Again, deferment options will save money here as well—you just won’t have as much time before having interest accrue on those funds

Stafford Loan FAQs

  • What is the difference between subsidized and unsubsidized loans?

Subsidized Stafford loans are awarded to students with financial needs, meaning that their expected family contribution (EFC) is below a certain threshold. Subsidized Stafford loans have a fixed interest rate that does not increase over time, unlike subsidized loans from other programs. Unsubsidized Stafford Loans are not based on financial need and do not have any restrictions on when you can borrow or how much you can borrow. Unsubsidized Stafford loans also have variable interest rates that are set annually by Congress and could change at any time without notice.* How much do I have to pay back?

Your payment amount depends on what year you graduated from school as well as whether or not your loan(s) were subsidized or unsubsidized.* What is the grace period? The grace period is how long after graduation before you start making payments on your loan(s). If this sounds familiar it’s because most people refer to it as their “grace period” when they think about paying off their credit card bills!


As you can see, Stafford Loans are a great option for people needing additional help in paying for college. But as with any type of financial aid, it’s important to know what you’re getting into before signing on the dotted line. If you have bad credit or are skeptical about taking on a loan, it’s always good to talk to an expert first.

Good luck with your education and thanks for reading!