The Stafford loan program is the most widely-used federal student loan program.
These loans are guaranteed by the federal government and come with a low fixed interest
rate and generous repayment provisions.
If you attend a direct lending school, Stafford loans are provided by the school
itself with the Department of Education serving as the lender. If you attend a non-direct
lending school (most colleges fall in this category), Stafford loans are provided
by private lenders.
Depending on the borrower’s financial condition, Stafford loans are either subsidized
or unsubsidized. For borrowers with financial need that meet federal criteria, the
Stafford loan will be subsidized by the federal government. For subsidized loans,
the government pays the interest on the loans during the in-school period, the grace
period and during deferment. For unsubsidized loans, all the interest that accrues
is ultimately paid by the student.
Remember, Stafford loans are not need-based so any student who attends an eligible
school and fills out the FAFSA can receive a Stafford loan.
Stafford loans have loan limits restricting how much students can borrow each year.
As of July 1, 2007, freshmen can borrow up to $3,500; sophomores can borrow up to
$4,500 while juniors and seniors can borrow up to $5,500.