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Stafford Loans are made through either our Federal
Family Education Loan (FFEL) Program or our William
D. Ford Federal Direct Loan (Direct Loan) Program.
Some schools participate in both programs. You can
receive both FFELs and Direct Loans, but not both types
for the same period of enrollment at the same school.
Under the Direct Loan Program, the funds for your loan
come from us and are delivered to you through
your school. Funds for your FFEL will come from
a bank, credit union, or other lender that participates
in the program.
The terms and conditions of both loans are similar.
The amounts you may borrow are the same whether
you get a Direct Stafford Loan or a FFEL Stafford
Loan. The major differences between the two programs
are the source of the loan funds and certain
repayment provisions.
How Can I Get a FFEL or Direct
Stafford Loan?
For either type of loan, you must fill out a FAFSA.
(Click on "Applying for Financial Aid" for more information.)
After your FAFSA is processed, your school will review the
results and will inform you about your loan eligibility.
You’ll also have to sign a promissory note, which is a
binding legal document that lists the conditions under
which you’re borrowing and the terms under which
you agree to pay back the loan.
If your EFC indicates you demonstrate
financial need, you can borrow a “subsidized“ FFEL
or Direct Loan to cover some or all of that need. If
you’re eligible for a subsidized loan, we pay the interest
while you’re in school at least half time, for the first six
months after you leave school, and during a period of
deferment (but not during forbearance). The amount of
your subsidized loan cannot exceed your financial need.
You might be able to borrow loan funds beyond your
subsidized loan limit or even if you don’t have demonstrated
financial need. In that case, you’d receive
an “unsubsidized“ loan. Your school will subtract the
total amount of your other financial aid, if any, from
your cost of attendance to determine the amount for
an unsubsidized loan. For this loan type, you’re
responsible for the interest from the time the loan
is disbursed until it’s paid in full. You can pay the
interest while you’re in school (or during a period of
deferment or forbearance), or you can
allow the interest to accumulate and be added to the
principal amount of your loan. Note that if interest
accumulates, the total amount you repay will be higher
than if you paid the interest all along.
You can receive a subsidized loan and an unsubsidized
loan for the same enrollment period as long as the
loans don’t exceed the annual loan limit.
How Much Can I Borrow?
If you’re a dependent undergraduate student (click here for a discussion of dependency status), each
year you can borrow up to the following amounts if
your period of study for that year is at least an academic
year in length:
- $2,625 if you’re a first-year
student
- $3,500 for the second year of
study
- $5,500 for the third and fourth years of study (each)
If you’re an independent undergraduate student or
a dependent student whose parents applied for but
were denied a PLUS Loan (a parent loan), each year you can borrow up to
the following amounts if your period of study for
that year is at least an academic year in length:
- $6,625 if you’re a first-year student (no more than $2,625 of this amount may be in subsidized loans)
- $7,500 for the second year of study (no more than $3,500 of
this amount may be in subsidized loans)
- $10,500 for the third and fourth years of study
(each)—no more than $5,500 of this amount may
be in subsidized loans
These amounts are the maximum yearly amounts you
can borrow in both subsidized and unsubsidized FFELs
or Direct Loans, individually or in combination. You
can’t borrow more than your cost of attendance minus
the amount of any Pell Grant you’re eligible for and
minus any other financial aid you’ll get. So, you might
receive less than the annual maximum amounts.
So, How Will I Get the Loan Money?
For both the Direct Loan and FFEL programs, you’ll be
paid through your school in at least two installments.
No installment may exceed one-half of your loan
amount. Your loan money must first be applied toward
tuition and fees, room and board, and other school
charges. If funds remain, you’ll receive them by check or
in cash, unless you give the school written authorization
to hold the funds until later in the enrollment period.
If you’re a first-year undergraduate student and a firsttime
borrower, your school cannot disburse your first
payment until 30 days after the first day of your enrollment
period. This practice ensures you won’t have a
loan to repay if you don’t begin classes or if you withdraw
during the first 30 days of classes.
What’s the Interest Rate on Stafford
Loans?
The interest rate is variable (adjusted annually) but
does not exceed 8.25 percent. For July 1, 2004 to June
30, 2005, the interest rate for loans in repayment was
3.37 percent. The interest rate is adjusted each
year on July 1. You’ll be notified of interest rate changes
throughout the life of your loan.
When Do I Pay Back My Loan?
After you graduate, leave school, or drop below halftime
enrollment, you’ll have a six-month grace period
before you begin repayment. During this period, you’ll
receive repayment information, and you’ll be notified
of your first payment due date. You’re responsible
for beginning repayment on time, even if you don’t
receive this information, however.
Payments are usually due monthly. You’ll have a
choice of repayment plans.
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