How Does FAFSA Stafford Loan Work

The FAFSA Stafford Loan is a type of federal fixed-rate student loan available to college, undergraduate and graduate students who are at least halfway through college. Also known as direct loans, these loans are made under the William D. Ford federal direct loan program. They are intended to complement the existing personal and family resources available for the cost of higher education, including work-study, scholarships, and grants. Federal Direct Loans can be used to pay for education expenses, including tuition, board and room, books, and other education-related expenses.

The FAFSA Stafford Loan Explained

Federal student loans were known as Stafford loans in a previous program administered by the Federal Family Education Loan program (FFELP). Beginning July 1, 2010, all new federal student loans were provided directly by the U.S. Department of Education under the William D. Ford Federal Direct Loan Program (Federal Direct Loans). Stafford loans and direct loans refer to the same loans.

How Does a FAFSA Stafford Loan Work?

Federally insured student loans can be subsidized (subsidized Stafford loans or direct subsidized loans), meaning the federal government pays the interest for specified periods, or unsubsidized (unsubsidized Stafford loans or direct unsubsidized loans).

Directly subsidized loans are only available to college students with demonstrated financial need, while undergraduate and graduate students can take out direct non-subsidized loans and financial needs are irrelevant. Depending on their situation, students may borrow larger amounts, but the maximum subsidizable amounts are $3,500 per year for freshmen, $4,500 per year for sophomores, $5,500 per year for juniors, and $5,500 per year for seniors or fifth-year students Year. The dependent status of the student also affects the amount they can borrow.

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FAFSA Stafford loans, now known as direct loans, provide low-cost, federally guaranteed funds to students who attend college at least half the time. Students must first be accepted into a college or university accredited to accept federal loans and complete the Free Federal Student Aid Application (FAFSA) before they can apply for the loan. To use a federal loan to fund your education, you must be enrolled in a program offered by an accredited school. Search this site to determine if the school you are considering is federally accredited.

Interest rates on FAFSA Stafford loans are generally lower than private loans, there is no credit check on most government student loans, and repayment does not begin until the student graduates from college or falls below part-time.

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