What Are Stafford Loans?

By Shannon C , last updated December 22, 2011

The Stafford loan is a special category of loan that is offered to students by the federal government. The purpose of applying for a Stafford loan is to finance the costs of higher education. There are two main types of Stafford loans, and two programs through which Stafford loans are administered and awarded. Depending on which type of Stafford loan you apply for or which program you apply through, the interest and repayment of your loan may be handled differently. The main qualification for being able to apply for certain types of Stafford loans is that the student must prove that they have a financial need for federal support to receive higher education, which is determined through an examination of family income. Other types of Stafford loans do not require proof of financial need. Learn more about what Stafford loans are and decide if a Stafford loan can help you achieve your educational goals.

What is a Stafford Loan

A Stafford loan is a loan issued by the federal government specifically for the purposes of helping a student to afford higher education. Some students who apply for a Stafford loan do so because of a family financial need while others do so because it is the smart way to pay for college expenses. There are two main types of Stafford loans: subsidized and unsubsidized. Subsidized Stafford student loans are more advantageous as the federal government will pay for all interest as long as you are enrolled as a student at a higher learning institution. Unsubsidized Stafford student loans will require the student to make all the interest payments even while your education is in progress, although in most cases you will be allowed to defer making the actual loan repayments until after you graduate.

How Does a Stafford Loan Work

You can apply for a Stafford loan through either the Federal Family Education Loan Program (FFELP) or the Federal Student Direct Loan Program (FSDLP). The FSDLP program is administered directly through the federal government. FSDLP loans, however, are administered when the federal government partners with other lenders such as banks or savings & loans. The federal government backs and guarantees all FFELP loans through the federal Treasury funds. FSDLP loans are also commonly called "direct loans" and they are administered through a federal agency called "Direct Lending Schools" and awarded, as their name implies, directly to the student or the student's family.

How to Apply for a Stafford Loan

Subsidized Stafford loans are only awarded to students with financial need, while unsubsidized Stafford loans are made available to any student even if that student cannot demonstrate a financial need. To apply for either type of Stafford loan, you must pre-qualify by filling out the FAFSA, or Free Application for Federal Student Aid. The loan making agency will then evaluate whether or not you qualify for a Stafford loan type. If you qualify, you will be able to defer repayment until six months after you graduate.

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