Direct Stafford Loans are federal student loans that are provided on an annual basis to both undergraduate, and graduate students. There are two Stafford Loans—the Direct Subsidized Loan, and the Unsubsidized Loan.
The Direct Subsidized Loan is based upon need, and does not accrue interest while you are in school. The Unsubsidized Loan does accrue interest while you are in school, and can be obtained regardless of your level of financial need.
Stafford Loans were issued under the Federal Family Education Loan Program, or FFELP until this government program became obsolete due to the passing of the Student Aid and Fiscal Responsibility Act, or SAFRA in 2010. Now all Stafford Loans are made directly via the Department of Education as part of the Direct Loan Program.
This means that going forward you will not have to get your money, or apply to any sort of third-party lender in order to secure a Stafford Loan, as private lenders who essentially acted as “middle-men” have been cut out of the loop as of the 2010-11 school year.
Stafford Loans can play a significant role in financing your higher education, as most students who get financial aid receive a Stafford Loan at some point during their college career. Overall these kinds of government student loans can contribute a substantial amount of money towards your education-related expenses, and they are preferable when viewed in comparison with private student loans.
Here are some quick facts about Direct Stafford Loans.
- Have a low and fixed interest rate that is set at 4.5% for 2010-11.
- Loan amounts vary in accordance with degree progression.
- You must be eligible to receive federal student aid to qualify.
- The FAFSA is the universal application for all Stafford Loans
- Have a wealth of repayment benefits, including both deferment and forbearance.
Eligibility for Direct Stafford Loans is first based on your ability to qualify for federal student aid. See the article on this site about the federal student aid eligibility requirements to determine where you stand.
The Subsidized Stafford Loan is based partly on need, while the unsubsidized version is not. You will therefore have to demonstrate the appropriate financial need in order to get the Subsidized Stafford Loan, while your school’s financial aid department will have the final say in the amount of money you will get via the Unsubsidized Loan.
Applying for both Stafford Loans is easy, and the only application that you must complete is the FAFSA. Remember that Stafford Loans are allocated and disbursed on an annual basis, and that you must fill out a new FAFSA each year that you want to become eligible not only for both Stafford Loans, but for all other types of federal student aid as well.
Loan Amounts
The amount of financing you can get via a Stafford Loan will depend on a number of factors, including the total number of credits you have completed towards your degree program, your dependency status, and whether or not you are receiving a Subsidized, or Unsubsidized Loan, or both.
The following has been taken from studentaid.ed.gov, and can give you the specific loan amounts that you may be eligible to receive for any particular award year.
Taken from studentaid.ed.gov:
“If you’re a dependent undergraduate student (excluding students whose parents cannot borrow PLUS loans) each year you can borrow up to:
- $5,500 (for loans first disbursed on or after July 1, 2008) if you’re a first-year student enrolled in a program of study that is at least a full academic year. No more than $3,500 of this amount can be in subsidized loans.
- $6,500 (for loans first disbursed on or after July 1, 2008) if you’ve completed your first year of study and the remainder of your program is at least a full academic year. No more than $4,500 of this amount can be in subsidized loans.
- $7,500 (for loans first disbursed on or after July 1, 2008) if you’ve completed two years of study and the remainder of your program is at least a full academic year. No more than $5,500 of this amount can be in subsidized loans.
If you’re an independent undergraduate student (and a dependent student whose parents have applied for but were unable to get a PLUS Loan (a parent loan)), each year you can borrow up to:
- $9,500 (for loans first disbursed on or after July 1, 2008) if you’re a first-year student enrolled in a program of study that is at least a full academic year. No more than $3,500 of this amount may be in subsidized loans.
- $10,500 (for loans first disbursed on or after July 1, 2008) if you’ve completed your first year of study and the remainder of your program is at least a full academic year. No more than $4,500 of this amount may be in subsidized loans.
- $12,500 (for loans first disbursed on or after July 1, 2008) if you’ve completed two years of study and the remainder of your program is at least a full academic year. No more than $5,500 of this amount may be in subsidized loans.
If you’re a graduate or professional degree student, each year you can borrow up to:
- $20,500. No more than $8,500 of this amount may be in subsidized loans.”
Final Words on Stafford Loans
Stafford Loans are one of the best types of student loans to get because of their low interest rates, and flexible repayment terms. The main downside to Stafford Loans has to do with their loan amounts, which are limited to a fairly significant degree, and are heavily contingent on your degree progress.
Regardless, these federal loans are great to have if you need money to put towards your higher education, and I highly suggest you go ahead and complete your FAFSA as soon as you possibly can after January first in order to take advantage of these great financial aid instruments.
