What should I know about Stafford student loans?

About Stafford student loans

Stafford loans are available as both subsidized and unsubsidized loans. With Stafford loans, no payments are expected on the loan while the student is enrolled (deferment). There is also a six-month grace period after the student leaves school either by graduating, dropping below half-time enrollment, or withdrawing.

A Federal Stafford student loan is actually composed of two types of financing programs for post-secondary students. Administered by the U.S. Department of Education, Stafford loans include the Federal Family Education Loan (FFEL) Program and the William D. Ford Federal Direct Loan (Direct Loan) Program.

A Stafford loan is made to a student, not a parent. The student completes an FAFSA (Free Application for Federal Student Aid) and submits it to the school of their choice. After review, your school will advise you of your eligibility for financing.

If you select a Direct Loan, your lender is the Federal government. Under the FFEL program, you will choose your lender from a “preferred” list offered by your school or you may select any other qualified lender, including credit unions. Your loan is guaranteed by the Federal government under this program.

A Stafford loan may be subsidized (accrued interest during school years is paid by the Federal government) or unsubsidized (accrued interest will be added to your loan balance). The primary reason for the difference is the documented “need” of the student. Subsidized Stafford loans are typically made to students demonstrating documented need, while unsubsidized loans are available regardless of your need factor.

Federal Stafford loan limits are determined by your year in school (first, second, third, etc.) and whether you are granted subsidized or unsubsidized financing. Check the current regulations to determine what limits you might face.

Be sure to read all terms and conditions and fully understand all aspects of a new loan before signing any papers.