Understand Stafford Student Loans

A Stafford Loan is an educational loan offered by the federal government, available to undergraduate students as well as professional and graduate students.

A Stafford Loan is currently the most popular student loan among federal student loan options due to its low interest rates and numerous borrower benefits. All Stafford Loans are eligible for in-school deferment, which allows students to defer repayments if enrolled in school at least half time. If a student drops below half-time enrollment or graduates, there is also a 6-month grace period, during which the borrower is not required to start making repayments.

Stafford Loans do come with strict eligibility requirements and borrowing limits. Annual and lifetime limits vary based on the type of program a student is enrolled in, the cost of attendance, the borrower’s dependency status, and level of degree.

The fees associated with Stafford Loans are on average 1.0% of the loan balance.

Subsidized vs. Unsubsidized

Stafford Loans can be either subsidized or unsubsidized. Subsidized loans do not charge interest to students while they are attending school on at least a half time basis, or during authorized times of deferment (such as during approved economic hardship.) Subsidized Stafford Loans are only given to undergraduate students who can demonstrate financial need.

Unsubsidized Stafford Loans begin accruing interest from the date of disbursement. Borrowers are fully responsible for paying the interest on the loan. All students, including those in professional or graduate school, that are eligible for federal aid are eligible for Unsubsidized Stafford Loans. However, the borrower’s school determines the amount that can be received based on the cost of attendance and any other financial aid received.

Stafford Loan Interest Rates

 In recent years, Subsidized and Unsubsidized Stafford loans have had the same interest rate associated with each loan. The period between mid 2008 and 2013, unsubsidized loans had higher interest rates.

 Historical interest rates by academic year are shown below.

Academic Year Undergraduate Subsidized Loans Undergraduate Unsubsidized Loans
2015-2016 4.29% 4.29%
2014-2015 4.66% 4.66%
2013-2014 3.86% 3.86%
2012-2013 3.40% 6.80%


How Do I Apply for a Stafford Loan?

Eligibility for Stafford Loans is determined by the FAFSA, the Free Application for Federal Student Aid. A borrower’s FAFSA is sent to the academic institution listed on the application with the expected family contribution level (EFC) of the borrower. The school will then determine the amount of aid that can be given in the form of Subsidized and/or Unsubsidized Stafford Loans.

Can Stafford Loans be consolidated or refinanced?

Stafford loans are eligible for consolidation under the Direct Consolidation Program. This program will consolidate all eligible federal loan debt into one loan with a monthly repayment based on the weighted-average repayments of the consolidated loans, with a new servicer and loan term.

Alternatively, creditworthy borrowers can refinance their Stafford Loans with private lenders. It is important to assess some of the federal loan borrower benefits that my be lost with a private loan refinancing, but often borrowers can reduce the overall interest rate and/or the monthly repayment on their student loans through a private student loan consolidation.

If you’re interested in taking out a private student loan or refinance your current loans, check out Credible to compare rates across multiple lenders by filling out just one simple form.

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