Federal Stafford Loan: What Borrowers Need to Know

If you’re applying to college, you may have heard a lot about Federal Stafford Loans, particularly from your parents or older relatives. But what exactly are Stafford Loans, and do they still exist?

Long story short: Stafford Loans are federal student loans that were created under the William D. Ford Federal Direct Loan Program. They are just another name for Direct Loans. They are available in subsidized and unsubsidized forms.

Follow the links below to learn more about Direct Loans, including interest rates, borrowing limits, eligibility requirements, and more, or continue reading below:

Stafford Loan Interest Rates

Federal student loan interest rates vary depending on the year in which they were disbursed. They are set by Congress.

Stafford Loans disbursed between July 1, 2019 and July 1, 2020 carry a 4.53% interest rate. Those disbursed between July 1, 2018 and July 1, 2019 carry an interest rate of 5.05%.

Do Stafford Loans have any fees?

In addition to interest, you will be charged a loan origination fee. This fee is a percentage of the total loan amount. The loan origination fee varies by year:

  • For loans disbursed between October 1, 2017 and October 1, 2018 it is 1.066%
  • For loans disbursed between October 1, 2018 and October 1, 2019 it is 1.062%
  • For loans disbursed between October 1, 2019 and October 1, 2020 it is 1.059%

How much can you borrow?

Exactly how much you can borrow in Stafford Loans will depend on whether your loans are subsidized or unsubsidized

Subsidized Stafford Loan Limits

In total, qualified undergraduates can borrow $23,000 in Subsidized Stafford Loans. The amount you can borrow each year of your undergraduate degree varies:

  • During your first year you can borrow $3,500 in subsidized loans
  • During your second year you can borrow $4,500 in subsidized loans
  • During your third year (and beyond) you can borrow $5,500 in subsidized loans

Typically, your school will determine exactly how much you can borrow each year and notify you of this amount in your financial aid package.

Unsubsidized Stafford Loan Limits

The total amount that you can borrow in Unsubsidized Stafford Loans will depend on a number of factors, including whether you are an undergraduate student (and if so, if you are a dependent or independent) or an undergraduate student, as well as the specific year of your education for which you are borrowing.

For undergraduate students who are dependent on their parents, you can borrow a total of $31,000 in Unsubsidized Stafford Loans. The amount varies by year:

  • During your first year you can borrow $5,500 in subsidized loans
  • During your second year you can borrow $6,500 in subsidized loans
  • During your third year (and beyond) you can borrow $7,500 in subsidized loans

For undergraduate students who are independent of their parents, you can borrow a total of $57,500 in Unsubsidized Stafford Loans. The amount varies by year:

  • During your first year you can borrow $9,500 in subsidized loans
  • During your second year you can borrow $10,500 in subsidized loans
  • During your third year (and beyond) you can borrow $12,500 in subsidized loans

For graduate and professional students, you can borrow a total of $138,500 in Unsubsidized Stafford Loans. This aggregate includes loans for your undergraduate career. You can borrow a total of $20,500 each year.

Typically, your school will determine exactly how much you can borrow each year and notify you of this amount in your financial aid package.

Subsidized Stafford Loan Eligibility

To qualify for a Subsidized Stafford Loan, you must:

  • Be enrolled at least half-time in college
  • Be enrolled in a program that will award you with a degree or certificate upon completion
  • Be an undergraduate student; graduate students do not qualify
  • Be able to prove financial need, as determined through your FAFSA application

Unsubsidized Stafford Loan Eligibility

To qualify for a Unsubsidized Stafford Loan, you must:

  • Be enrolled at least half-time in college
  • Be enrolled in a program that will award you with a degree or certificate upon completion
  • Be either an undergraduate, graduate, or professional student

You do not need to demonstrate financial need to qualify.

How to Apply for a Stafford Loan

By completing our FAFSA application, you will automatically apply for all types of financial aid. If you are eligible to receive a Stafford Loan based on your FAFSA application, your school will notify you in your financial aid package. It may be listed as a Direct Subsidized Loan or a Direct Unsubsidized Loan.

You can submit a FAFSA application here.

Stafford Loan Repayment Plans

Whether your Stafford Loan is subsidized or unsubsidized, the U.S. Department of Education is your lender. That being said, your loan will be serviced by one of 11 federal student loan servicers. Your servicer will accept your monthly payments, advise you of your repayment options, and otherwise manage your loan.

Borrowers with Stafford Loans are typically eligible to enroll in the following repayment plans:

  • Standard Repayment Plan
  • Graduate Repayment Plan
  • Extended Repayment Plan
  • Revised Pay As You Earn Repayment Plan (REPAYE)
  • Pay As You Earn Repayment Plan (PAYE)
  • Income-Based Repayment Plan (IBR)
  • Income-Contingent Repayment Plan (ICR)
  • Income-Sensitive Repayment Plan

If you would like to change the repayment plan on your Stafford Loan, simply contact your loan servicer.

Stafford Loan Refinancing and Consolidation

There is no federal student loan refinancing program. In order to refinance your Stafford Loan, you would need to turn to a private lender who would essentially convert your loan into a private loan. While this may bring benefits such as a lower interest rate or lower monthly payments, it also means that you will be losing certain benefits carried by federal loans, such as the ability to place your loans in deferment or forbearance.  Therefore, it’s important to weigh the pros and cons of refinancing before you make a decision.

Student loan consolidation is a process in which you combine multiple federal student loans into a single new loan, called a Direct Consolidation Loan. This new loan’s balance will be the total of all of its component loans, added up. The interest rate that it carries will be the weighted average of all of the loans that make it up.

Stafford Loans can be consolidated under this program.

Stafford Loan History

The Higher Education Act of 1965 created the Federal Guaranteed Student Loan program, which made federally-backed student loans available to college students. This program was renamed the Robert T. Stafford Student Loan Program in 1988, and the loans offered through the program became commonly referred to as Stafford Loans. The official name for Stafford Loans are Direct Subsidized and Direct Unsubsidized Loans.

Alternatives to Stafford Loans

If you do not qualify for Stafford Loans (Direct Subsidized and Direct Unsubsidized Loans) or they do not cover the full cost of going to college, you do still have other options at your disposal. For example, the parents of dependent undergraduate students may qualify to borrow Direct Parent PLUS Loans to cover any gaps that still exist.

Additionally, you may be able to borrow private student loans, though these will typically be more expensive.