Federal Stafford Loans

Stafford Loans are the most common form of federal financial aid. Loans with interest subsidies are awarded based upon financial need, while loans without interest subsidies are generally available to all students who file a FAFSA.

The Federal Direct Stafford Loan Program is the largest student loan program in the United States. The U.S. Department of Education (ED) offers fixed, low-interest Stafford Loans to eligible students to help cover the cost of college. Under this program, ED is the lender. To be considered for a Stafford Loan, students must complete a FAFSA. There are two types of Stafford Loans: Subsidized and Unsubsidized.

Students defer payment on the Stafford Loans while the student is enrolled half-time. After ceasing half-time enrollment (due to graduating, taking a leave of absence, withdrawing, or taking fewer than half-time classes), students will receive a six month grace period where they will continue to defer payment. At the conclusion of the grace period, the student will be required to make repayment towards the loans. If a student re-enrolls at least half-time before the grace period expires, the student will once again defer payments and the 6 month grace period will reset and be available to the student again upon dropping below half-time enrollment the next time. However, if a student re-enrolls at least half-time after the 6 month grace period expires, the student can defer payments while enrolled, but will not receive another grace period for those loans upon dropping below half-time enrollment in the future.

Subsidized vs. Unsubsidized Loans

The two main differences between Subsidized and Unsubsidized Loans are eligibility and how interest accumulates. Subsidized Loans are available only to undergraduate students with financial need as demonstrated on the FAFSA. Graduate students are not eligible for Subsidized Loans. While the student defers payment while enrolled and during the six month grace period, the Federal Government pays the interest on the Subsidized Loan. After the grace period ends, interest will begin accruing on the loan.

Unsubsidized Stafford Loans are available to both undergraduate and graduate students. While students must complete a FAFSA to be eligible, they are not required to demonstrate financial need to receive Unsubsidized Loans. Unlike the Subsidized Loan, interest on the Unsubsidized Loans begins when the loan is disbursed. Even though the student is not required to may payment during the deferment and grace periods, the Office of Financial Aid highly, highly recommends that the student makes payment on the interest as it accumulates before the grace period ends. If there is any unpaid interest on the loan when the grace period ends, the unpaid interest will capitalize, which means the amount of unpaid interest will be added to the principle balance. Interest will accrue on this combined amount, rather than just on the original principle balance. This will cost the student more money in the long term because of the interest assessed on a larger principle balance.

APR

Interest rates for both types of Stafford Loans are fixed for the life of the loan, which means the interest rate is locked and will not change for the life of the loan. The Federal Government will set and publish the APR each year for the loans disbursed for that academic year. See the chart below for the current and previous year’s rates.

Loan Type

Borrower
Type

APR for Loans 
7/1/16 - 6/30/17

APR for Loans 
7/1/15 - 6/30/16

Direct Subsidized Loans

Undergraduate

3.76%

4.29%

Direct Unsubsidized Loans

Undergraduate

3.76%

4.29%

Direct Unsubsidized Loans

Graduate

5.31%

5.84%

Direct Stafford Loan Fee Amounts

The U.S. Department of Education assesses a loan origination fee, which reduces the total award amount that is listed on a student’s award letter. See the table below for the fees assessed on Stafford Loans throughout the 2016 – 2017 Academic Year.

Loan Originated Between...

Awarded Amount

Fee Amount

Net Amount Received

10/1/16 – 9/30/17

$1,000

1.069% ($10.69)

$989

10/1/15 – 9/30/16

$1,000

1.068% ($10.68)

$989

Award Amount Limits

The U.S. Department of Education places a limit on the amount of Subsidized and Unsubsidized Loans a student may receive in a given academic year and also how much in total. As students progress through their field of study, eligible students may receive more Stafford Loan amounts.

However, there is a maximum amount, or aggregate limit, of Stafford Loans a student may receive. If this total aggregate limit is reached, the student may not receive additional Stafford Loans and may also lose the interest subsidy on the Subsidized Loans. The student can regain some borrowing eligibility by making payments on the existing loans to bring their total Stafford Loan balance below the aggregate limit.

Borrowing Limits for Federal Direct Stafford Loans

 

Subsidized Loan
Base Amount

Additional Unsubsidized
Loan Amount

All
Undergraduates

Graduate
Students*

Dependent
Undergraduates

Independent
Undergraduates

Graduate
Students

First
Year

$3,500

N/A

$2,000
(up to $5,500 total)*

$6,000
(up to $9,500 total)*

$20,500

Second
Year

$4,500

N/A

$2,000
(up to $6,500 total)*

$6,000
(up to $10,500 total)*

$20,500

Third Year
and Beyond

$5,500

N/A

$2,000
(up to $7,500 total)*

$7,000
(up to $12,500 total)*

$20,500

 

Subsidized Loan Aggregate
Limit

Total Loan Aggregate Limit
(Subsidized + Unsubsidized) 

$23,000

$65,000**

$31,000
(only $23,000
can be subsidized)

$57,500
(only $23,000
can be subsidized)

$138,500
(only $65,500 can be subsidized**)

*The amount of Unsubsidized Loan a student can receive if not eligible for the full Subsidized Loan amount
**Graduate aggregate limits include all Stafford Loans received as an undergraduate.

Note: Dependent students whose parents are unable to obtain a PLUS Loan are eligible to receive Unsubsidized Stafford Loans equal to the amounts an independent student receives.

Loan Entrance Counseling and Master Promissory Note

The U.S. Department of Education requires students to complete Loan Entrance Counseling and sign a Master Promissory Note (MPN) prior to receiving a Stafford Loan.

Loan Entrance Counseling advises students what it means to take a federal student loan and teaches what a Stafford Loan is, how the loan process works, how to manage education expenses, what other financial resources to consider, and their rights and responsibilities as a student borrower.

The Stafford MPN is a legal agreement between the student and the Federal Government in which the student promises to repay the loans and any accrued interest and fees to the U.S. Department of Education. It also explains the terms and conditions of the loans, such as how interest is calculated and what deferment and cancellation provisions are available.

Both the Loan Entrance Counseling and MPN must be completed at studentloans.gov. Both requirements for the Stafford Loans will be designated as Subsidized/Unsubsidized Loan Entrance Counseling and MPN. The Office of Financial Aid automatically receives notification when a student completes these requirements. Stafford Loans will not disburse or appear on the billing statement if Entrance Counseling has not been completed or if the MPN has not been signed.

Note: There are separate MPNs for Stafford Loans and PLUS Loans. A borrower must complete the appropriate MPN for the loan they are receiving. If a borrower is receiving both Stafford and PLUS Loans, both MPNs must be completed.

For assistance in completing Loan Entrance Counseling and the Master Promissory Note, please see our Step-by-Step Instructions for Undergraduate Students or Graduate Students.

Exit Counseling

Once the student graduates, takes a leave of absence, or enrolls less than half-time, the student will be required to complete  Exit Counseling as the student will enter the six month grace period and begin repayment at its conclusion. In order to prepare, the Federal Government requires the student to complete another training module similar to Entrance Counseling, but with a focus on the repayment obligation aspects. The student would also be required to provide references who will know the student's whereabouts for the next several years. One must be a next of kin and the two others must be individuals with different addresses. The contact information would only be used if the loan servicer loses contact with the student.

For students who are graduating, Exit Counseling should be completed before the end of the semester, but no earlier than 30 days prior. At the end of each semester, the Office of Financial Aid will hold several in-person group counseling sessions to complete this requirement and students will receive an email notification of the dates and locations. Exit Counseling may also be completed online at studentloans.gov for those students unable to attend the in-person sessions. Students who take a leave of absence, withdraw, or drop below half-time enrollment should complete Exit Counseling online immediately as the Office of Financial Aid does not provide one-on-one in-person Exit Counseling sessions.

Step-by-Step Instructions for Exit Counseling

Repayment

While the U.S. Department of Education (ED) is the lender for the Stafford Loans, the ED will assign the loan to a financial institution to be the servicer of the loan. The loan servicer will handle the billing and other customer service related functions such as consolidation and changing repayment plans. The ED will determine the servicer within 60 - 90 days after the first disbursement of the loan. The servicer will then contact the borrower with introductory information and how to start making payments.

Students can begin repaying Stafford Loans immediately without penalty. It is recommended that, at minimum, payments on the interest of Unsubsidized Stafford Loans are paid monthly, even if principle repayment isn’t required until after the end of the deferment period.

After a student graduates, drops below half-time enrollment, or leaves schools, the loan servicer will be in contact regarding upcoming payment as the student enters their six month grace period. Students are required to make payments even if they do not receive a bill.

For information regarding repayment plans, please visit Federal Student Aid.
Students can estimate their loan payments with Federal Student Aid's Repayment Estimator.
Students can check to see who their loan servicer is by logging in to NSLDS.
For general information about managing student debt, please visit our Debt and Default Management page or our Student Debt Guide.

150% Direct Stafford Subsidized Loan Limit

The U.S. Federal Government limits a first-time borrower's eligibility for Subsidized Stafford Loans to a time period not to exceed 150% of the length of the borrower's educational program. For example, if a first time borrower enters a 4-year degree program, the student is eligible to receive Subsidized Loans for a total of 6 years (4 years X 150%). If a student enters a 2-year degree program, the student would be eligible for only 3 years (2 years X 150%).

Also under certain conditions, the provision also causes first time borrowers who have exceeded the 150% limit to lose the interest subsidy on their Subsidized Loans.

This provision applies only first-time borrowers on or after July 1, 2013. Generally, a first-time borrower is one who did not have an outstanding balance of principal or interest on a Direct Loan or on a FFEL Program Loan on July 1, 2013.

For more information, please click here: 150% Subsidized Loan Information