Direct Stafford Loan for Students
What is the Direct Stafford Loan?
The Direct Stafford Loan is a low-cost borrowing option for students, backed by the U.S. government. Both undergraduate and graduate students attending accredited institutions are eligible to receive Direct Stafford Loan funds. You must complete the FAFSA to be eligible for Direct Stafford Loan funds, or any other federal financial aid.
Stafford Loan Lenders
You can only obtain Direct Stafford Loans through the government (Direct Loan Program loans).
Direct Stafford Loan Borrowing Limits (Subsidized and Unsubsidized)
The maximum funds you can borrow under the Direct Stafford Loan program are based on your year in school:
- $5,500 Freshman undergraduate, dependent student
- $6,500 Sophomore undergraduate, dependent student
- $7,500 Junior, Senior and 5th year undergraduate dependent students
- $20,500 Graduate students
Subsidized Loans vs. Unsubsidized
Your financial aid award letter should tell you whether you are eligible to receive subsidized loan funds. The interest on subsidized loans is paid by the government while you are in school, during your grace period and during authorized periods of deferment. Subsidized loans are given to students based on financial need.
If you receive unsubsidized Direct Stafford Loans, it simply means that your interest is not being subsidized by the government, and you will be responsible for paying it.
Student Loan Interest Rate
The student loan interest rate for new Stafford Loans is set to decline every year through 2012 for the subsidized portion of the loan only:
| Disbursement date |
Student loan interest rate (subsidized loan) |
| July 1, 2008 to June 30, 2009 |
6.0% |
| July 1, 2009 to June 30, 2010 |
5.6% |
| July 1, 2010 to June 30, 2011 |
4.5% |
| July 1, 2011 to June 30, 2012 |
3.4% |
| July 1, 2012 to June 30, 2013 |
6.8% |
The unsubsidized portion of the Direct Stafford loan remains at a fixed 6.8% interest rate.
6 month Grace Period
Once you graduate or drop below half-time enrollment, Direct Stafford loans provide for a 6 month “grace period” during which you are not required to make payments.
When to Use Direct Stafford Loan Funds
Make sure that you have exhausted free money options, such as grants and scholarships, before incurring college debt. Direct Stafford loans with loan balances under $30,000 have a maximum 10-year repayment period, so you will be accumulating interest and making payments on these loans during that time. Always use Direct Stafford Loan funds before pursuing other student loan options, such as private student loans, which are typically a more expensive option.
When Stafford Loan Funds are Not Enough
Many undergraduate students find that Stafford funds are not enough to cover the full cost of college due to the low borrowing limits. Once you have exhausted your free money and Stafford funds, you and your parents should begin research on the Direct Parent PLUS Loan and private student loans.