Understanding the Stafford Student Loan Program

Overview of Rules and Benefits of Federal Stafford Loans

College male graduates hugging and smiling

Direct Stafford loans, which are offered through the William D. Ford Federal Direct Loan program, are the basic building block of most students' financial aid packages. Students using Stafford loans can typically borrow a significant amount of money regardless of their financial need, for both undergraduate and graduate school programs.

The interest rate and terms for Stafford loans can vary depending on whether the loans are subsidized or unsubsidized, but in either scenario, they represent one of the best choices for borrowing to pay college costs.

Borrowing Limits

Stafford loan limits are based on whether a student is considered a dependent and their year in school. The maximum loan amounts are outlined in the charts below.

Year Dependent Independent
Freshman (0-29 credit hours)  $5,500 ($3,500 subsidized, $2,000 unsubsidized) $9,500 ($3,500 subsidized, $6,000 unsubsidized)
Sophomore (30-59 credit hours) $6,500 ($4,500 subsidized, $2,000 unsubsidized)  $10,500 ($4,500 subsidized, $6,000 unsubsidized) 
Junior/Senior (60+ credit hours) $7,500 ($5,500 subsidized, $2,000 unsubsidized)  $12,500 ($5,500 subsidized, $7,000 unsubsidized) 
Graduate/Professional Not applicable $20,500 (all unsubsidized)

Dependent students who were not able to secure a PLUS loan for additional funds can borrow money up to the independent student loan amount. Additionally, there is a lifetime limit on Stafford loans—currently capped at $31,000 for dependent students, $57,500 for independent students, and $138,500 for graduate students.

Aggregate Maximum Subsidized Loan Limit Aggregate Maximum Unsubsidized Loan Limit Total
Dependent Students  $23,000 $8,000 $31,000
Independent Students $23,000 $34,500 $57,500
Graduate Students  $65,500 $73,000 $138,500

Subsidized vs. Unsubsidized

With a subsidized Stafford Loan, the federal government pays the interest on the loan while a student is still in school. In other words, the loan value has nothing added to its original amount until after you graduate. Subsidized loans are available based on financial need.

Students who don't qualify for a subsidized loan can still receive an unsubsidized loan but will accrue interest while they are still in school. However, they do not have to begin repaying the loan until after they graduate, and their six-month grace period has ended.

The amounts of subsidized loans a student can receive are limited to the dependent maximums listed above. For example, the maximum subsidized loan amount for a freshman student would be $3,500. Any additional Stafford loans received, up to the freshman year maximum of $9,500, would be unsubsidized.

Graduate students are not eligible to receive subsidized loans.

Interest Rates and Fees

The Federal Student Aid website maintains and regularly updates information about the current interest rates for federal student loans. It's important to check it occasionally because the rates charged will vary by loan and borrower type. As an example, for loans with disbursement between July 1, 2021, and July 1, 2022, the rate for direct subsidized and unsubsidized undergraduate loans is 3.73%, while the rate for graduate and professional programs is 5.28%.

In addition to the interest paid on a Stafford loan, there is also a loan fee. For loans with a first disbursement date on or after October 1, 2020, and before October 1, 2022, the loan fee is 1.057% of the total loan amount. This fee is partially deducted from each disbursement check.


Repayment of all Stafford Loans begins six months after a student either graduates, drops out, or drops below half-time status. During this six-month grace period, interest does not get added onto a subsidized loan but accrues for unsubsidized loan balances. Stafford Loans allow you to choose a repayment plan from the following options:

  • Standard: Fixed payments that make sure your loans are paid off within ten years.
  • Graduated: Payments begin lower and then gradually increase with time (generally every two years). Loans are intended to be paid off within ten years.
  • Extended: Payments can be fixed or graduated and intended to be paid off within 25 years.
  • Income-Based: Payments will either be 10% or 15% of your discretionary income. However, payments may never be more than someone would have paid on a Standard Repayment Plan. The payment amount will be recalculated each year based on family size and income.

The income-based repayment plans include the following:

  • Revised Pay As You Earn Repayment Plan (REPAYE): Direct Loan borrowers with an eligible loan can qualify. Monthly payments are 10% of discretionary income and are recalculated annually based on your updated income and family size.
  • Pay As You Earn Repayment Plan (PAYE): Must be a new borrower on or after Oct. 1, 2007, and received a disbursement of a Direct Loan on or after Oct. 1, 2011. Monthly payments are 10% of discretionary income.
  • Income-Based Repayment Plan (IBR): Eligible borrowers must have a high debt-to-income, and monthly payments will be either 10% or 15% of discretionary income.
  • Income-Contingent Repayment Plan (ICR): Any Direct Loan borrower is eligible. The monthly payment is the lesser of 20% of discretionary income or the amount you'd pay on a repayment plan with a fixed payment over 12 years, adjusted according to your income.
  • Income-Sensitive Repayment Plan: Available only for loans under the Federal Family Education Loan Program (FFEL), which are not eligible for Public Service Loan Forgiveness (PSLF). The monthly payment is based on annual income, but the loan must be paid in full within 15 years.


Regardless of whether or not you are applying for a subsidized or unsubsidized Stafford Loan, you must fill out a FAFSA form. Once completed, the FAFSA form is forwarded to your school, which will then inform you of your loan eligibility and lender options. When you accept the loan, you are required to sign a master promissory note before any funds can be disbursed.

Article Sources

  1. Federal Student Aid. "Direct Stafford Loans."

  2. Federal Student Aid. "Subsidized and Unsubsidized Loans."

  3. Federal Student Aid. "Federal Student Loan Programs," Page 2.

  4. Federal Student Aid. "Federal Interest Rates and Fees."

  5. Federal Student Aid. "Repayment Plans."

  6. Federal Student Aid. "Complete the FAFSA Form."