What is a Federal Stafford Loan?

A Federal Stafford Loan is a fixed-rate federal student loan provided by the US Department of Education to undergraduate or graduate students to finance school expenses like college tuition fees. It can be availed through the Federal Family Education Loan (FFEL) Program or the William D. Ford Federal Direct Loan Program.


Subsidized and Unsubsidized Loan

A Stafford loan can be subsidized or unsubsidized. Subsidized loans are only awarded to students who have financial needs, while unsubsidized loans are granted regardless of the students economic stability. For borrowers with a subsidized Stafford loan, the federal government pays the interest while he or she is still studying and until the grace period ends. On the other hand, borrowers under unsubsidized plans take the responsibility of paying the interest accumulated during any period.

Interest Rate

The interest rate for subsidized and unsubsidized Stafford loans are not the same. The latter has a fixed-rate of 6.8%. The interest rate for subsidized loans granted to undergraduate students has been reduced by the government starting July 1, 2008 to July 1, 2012. Interest rates in this type of plan are adjusted annually within this given period:

  • 5.6% - disbursed on or after July 1, 2009 and disbursed before July 1,2010
  • 4.5% - disbursed on or after July 1, 2010 and disbursed before July 1, 2011
  • 3.4% - disbursed on or after July 1, 2011 and disbursed before July 1, 2012

Annual changes of the interest rates can be monitored by a borrower through the Federal Student Aid website.


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