Student-centric advice and objective recommendations
Higher education has never been more confusing or expensive. Our goal is to help you navigate the very big decisions related to higher ed with objective information and expert advice. Each piece of content on the site is original, based on extensive research, and reviewed by multiple editors, including a subject matter expert. This ensures that all of our content is up-to-date, useful, accurate, and thorough.
Our reviews and recommendations are based on extensive research, testing, and feedback. We may receive commission from links on our website, but that doesn’t affect our editors’ opinions. Our marketing partners don’t review, approve or endorse our editorial content. It’s accurate to the best of our knowledge when posted. You can find a complete list of our partners here.
Federal Stafford Loans: Everything You Need to Know
Annie has spent the past 18+ years educating students about college admissions opportunities and coaching them through building a financial aid package. She has worked in college access and college admissions for the Tennessee Higher Education Commission/Tennessee Student Assistance Corporation, Middle Tennessee State University, and Austin Peay State University.Federal Stafford Loans are a type of student loan offered by the U.S. Federal Government. These student loans are oftentimes referred to as Direct Loans or Direct Stafford Loans and are available to students pursuing higher education at four year universities and colleges, community colleges, as well as trade, career, or technical schools.
If you are applying for student loans or have student loans, chances are that you have encountered the Stafford Loan program. In this guide, we’ll be breaking down the Stafford Loan program so you know everything you need to know!
- Unsubsidized vs. Subsidized Stafford Loans
- Direct Loan Eligibility
- Stafford Loan Deadlines
- Direct Stafford Loan Borrowing Limits
- Federal Stafford Loan Interest Rates
- How to repay your federal Stafford Loans
Unsubsidized vs. Subsidized Stafford Loans
Stafford Loans actually come in two different types: Unsubsidized Stafford Loans and Subsidized Stafford Loans:
Subsidized Stafford Loans
When you have a Subsidized Stafford Loans, the federal government will pay the interest on your loans for you in certain situations like when you are in school, your student loans are in deferment, or in the immediate months after you graduate. So when you are in school and taking at least 12 credit hours, all of the student loan interest will be paid by the government. Remember, this is just the student loan interest and not the money you originally borrowed (also known as the principle), which you will still be responsible for repaying.
Unsubsidized Stafford Loans
Unsubsidized Student Loans do not enjoy the same treatment, and your interest will immediately start to accumulate when you are in school. This is the main reason why Subsidized Direct Stafford Loans are preferable to Unsubsidized Direct Stafford Loans.
If you are a prospective graduate student, note that you will only be able to access Direct Unsubsidized Student Loans as the Subsidized loans are only available for undergraduates.
Go Deeper: Subsidized vs. Unsubsidized Student Loans: What you need to know
Direct Loan Eligibility
Direct Loan eligibility require two main things from students:
- Students must be enrolled in higher education that will lead to a degree or certificate
- Students must complete and submit the Free Application for Federal Student Aid or FAFSA
Once you are accepted to a college, you will receive a financial aid award letter outlining your various options for paying for college (including any Direct federal student loans).
Subsidized Direct Loan Eligibility
If your financial aid award letter only includes Unsubsidized Stafford Loans, your EFC was too large to qualify for Subsidized Stafford Loan.
Unsubsidized student loans have no financial need requirement, so as long as you submit your FAFA and have been accepted into college, you should be good to go.
Stafford Loan Deadlines
There is no deadline to apply for the Stafford Loans. You’ll just want to make sure your FAFSA has been completed by the college deadline. It is essential that you submit your FAFSA by the deadline (and remember the FAFSA opens up on October 1st each year, which gives you many months to finish the application).
Direct Stafford Loan Borrowing Limits
One of the most common questions students ask about Stafford Loans is “how much money can I get?”
The amount of money you can receive from a federal Stafford Loan will depend on two factors:
- What year you are in college?
- Is the loan Subsidized or Unsubsidized?
For Subsidized Student Loans
If you are taking out subsidized student loans, your borrowing limit will be the same each year:
| Academic Year | Subsidized Direct Loan Amount |
| First year | $2,000 |
| Second year | $2,000 |
| Third year (and beyond) | $2,000 |
For Unsubsidized Student Loans
Meanwhile, unsubsidized Direct loan borrowing limits increase each year:
| Academic Year | Unsubsidized Direct Loan Amount |
| First year | $3,500 |
| Second year | $4,500 |
| Third year (and beyond) | $5,500 |
Remember, students can “stack” these loans together, so if you qualify for both types of Direct Loans, your borrowing limits will actually be $5,500 as a first year, $6,500 as a second year, and $7,500 as a third year (and beyond).
How to qualify for additional loan dollars
Generally, the next loan option after Direct Loans are Parent PLUS loans. However, if your parents do not qualify for these loans, you may be eligible to receive additional unsubsidized loans from the U.S. Department of Education. Students should be sure to talk to their college’s financial aid office for more information if they didn’t qualify for the PLUS loan.
Federal Stafford Loan Interest Rates for 2021-2022 Academic Year
Stafford Loan interests rates are set by the federal government each year on June 1st. The current interest rates for Direct Stafford Loans are:
| Interest Rate | |
| Undergraduate (both subsidized and unsubsidized Direct Loans) | 3.73% |
| Graduate (unsubsidized Direct Loans) | 5.28% |
How to repay your Federal Stafford Loans
One of the major benefits of taking out a Federal Stafford Loan is the variety of repayment options. Different repayment plans have different pros and cons depending on your financial situation, goals, and whether or not you have private loans. We recommend a student research their repayment options to pick the best plan for them.
Keep reading: Navigating different types of student loans
