A Complete Guide To Stafford Loans

By Emily Plummer on December 7, 2015

Going to college is expensive. Tuition, housing, books, food, it all adds up to quite a hefty amount. And for many of us, paying that large bill out of pocket is not entirely feasible.

To alleviate that burden, there are several programs in the business of providing financial aid through scholarships and loans. Probably the most popular of these are the Stafford Loans (often referred to simply as direct subsidized or direct unsubsidized loans).


Loans can seem a bit daunting to figure out. Scholarships are pretty simple: you apply, they send you money, you send that money to your school, end of story. Loans, on the other hand, can be a little less straightforward.

But that is where I come in. Here is everything you need to know about Stafford Loans, so that you can be fully prepared to tackle financial aid. (For more information, check out https://studentaid.ed.gov)

What are Stafford Loans?

First and foremost, let’s get ourselves acquainted with what these loans actually are. Stafford Loans are loans offered to students of higher education by the federal government to cover their costs of attendance to their school.

Who is eligible?

Everyone! Well, more specifically, everyone attending American institutions of higher education. This includes undergraduates, graduates, and professional students.

Depending on your financial need you will be eligible for different types of Stafford Loans. Those determined to have financial need are offered subsidized loans, and those without financial need are offered unsubsidized loans. Who determines this, you may ask? That’s our next subject.

How to apply

Eligibility for Stafford Loans is determined, like most federal financial aid options, with the FAFSA, the Free Application for Federal Student Aid. This is an application you are most likely going to be filling out for all sorts of scholarships through the federal government, as well as other institutions that require the filling out of a FAFSA before consideration for their scholarship.

In your Award Letter from FAFSA, you will be notified of what aid you are eligible for based on the financial information of your family. This letter will inform you as to what scholarships you may be able to receive, as well as what type of loan you are eligible for.

Two types of Stafford Loans

As I mentioned earlier, there are two types of Stafford Loans that you may be eligible to receive: subsidized and unsubsidized. Now, let’s go over the two types:


This loan is offered to those students who demonstrate financial need, and your school will determine how much you can borrow. This amount cannot exceed your amount of financial need.

The benefit of subsidized loans is that the federal government pays the interest accrued on the loans while the student is in school, during the six-month grace period after graduation, and during deferment (postponement of loan payments by the student). This means that you get interest-free money during your time in school!


For those students without demonstrated financial need, the federal government will offer unsubsidized loans. Again, the school will determine the amount of the loan based on other financial aid awards and the school’s own cost of attendance.

With this type of loan, the student is required to pay interest that accumulates while they are in school. The student can choose to pay this interest during their schooling, or allow it to add up and be combined with the total loan balance to be paid off once they graduate.

Is this the loan for you?

That is hard to say. For every student, the type of financial aid they are eligible for and the type of aid they should pursue are different. This requires a look at your family’s financial information, as well as your own plans post-graduation.

Do you plan on getting a job right away? Or are you planning to travel, get an unpaid internship, or pursue further schooling? This will affect the funds available to you for repaying your loans.

It is a good idea to talk about these plans with your parents sooner rather than later so that you can be sure you don’t have lots of interest accruing during your education that you will be unable to pay back after graduation.

But of course, you do need some way of paying for all the costs associated with higher education, so have a conversation.

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