What is a Federal Stafford Student Loan?

A federal Stafford student loan is a part of a United States (US) government program to help college students fund their education. The loan is given primarily based on financial need, and requires the history and financial status of applicants in order to determine eligibility. Unlike a grant or scholarship, a federal Stafford student loan must be repaid after a student graduates or leaves school.

The loan was originally created as part of the Higher Education Act of 1965 and was first known as the Federal Guaranteed Student Loan Program. Like the rest of the Higher Education act, the loan program was meant to strengthen college attendance and create provisions for qualified students that suffered from financial difficulties. While revising the bill in 1988 to create new programs and eliminate aid for students convicted of drug charges, Congress voted to change the name of the loan program to the federal Stafford student loan in honor of veteran Senator Robert T. Stafford of Vermont. Senator Stafford, a congressman for nearly than twenty years at the time, was greatly admired for his dedication and visionary work with higher education.

One of the main features separating a federal Stafford student loan from a private loan is a fixed interest rate. When a student contracts to receive lone money they are guaranteed an interest rate typically considerably lower than one on most bank loans. While interest will accrue on the loan, the student can rest a bit easier knowing that their increased repayment to the government will be lower than one to a bank or private lender.

Another major benefit of the federal Stafford student loan is the potential for subsidized loans. For qualifying students, a portion of the monies received each year can be designated as subsidized according to federal limits. This means that the government pays the interest on that portion of the loan while the student is in school. Unsubsidized loans accrue interest from the moment they are disbursed, leading students to face a considerably higher debt upon graduation. Most students subsisting entirely on loans will be granted a blend of subsidized and unsubsidized monies.

The federal Stafford student loan makes additional provisions for graduate students. In recognition that the costs of graduate school are often higher, the loan limits for grad students are also considerably higher per year. In addition, graduate students may have access for another federal loan program known as the Graduate PLUS loans, that can cover the remaining amount of tuition beyond the limits of the federal Stafford student loan.

Upon graduation, students typically have a grace period of six to nine months before repayment is required. Repayment schedules can be tailored to a variety of lifestyles, and may be paid off over ten, 20, or 30 years. Although choosing a long repayment schedule may result in initially lower payments, students must realize that the accruing interest will lead to a much higher total debt over time. It is typically wise to repay loans as quickly as possible to avoid additional interest.