Understanding the Stafford Student Loan Program

Overview of Rules and Benefits of Federal Stafford Loans

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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.

Key Takeaways

  • Stafford loans are direct loans the Department of Education offers to undergraduate and graduate students.
  • The loans have maximum borrowing limits based on whether you're a dependent and what year of school you're in.
  • Stafford loans are divided into subsidized and unsubsidized loans.
  • You can choose between eight different repayment plans.

Stafford Loan Borrowing Limits

Stafford loan limits are based on two things:

  • Are you a dependent?
  • What year are you in school?

The maximum loan amounts are outlined in the charts below.

Maximum Yearly Amounts
Year Dependent Independent
First-year (0-29 credits) $5,500 ($3,500 subsidized, $2,000 unsubsidized) $9,500 ($3,500 subsidized, $6,000 unsubsidized)
Second-year (29.1-59 credits) $6,500 ($4,500 subsidized, $2,000 unsubsidized)  $10,500 ($4,500 subsidized, $6,000 unsubsidized) 
Third-year and beyond (59.1+ credits) $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" refers to students who are listed as a dependent on someone else's taxes. "Independent" refers to students who are not listed as a dependent on someone' else's taxes.

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 undergrads, $57,500 for independent undergrads, and $138,500 for graduate students.

Maximum Lifetime Loan Amounts
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 doesn't accrue interest 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 $5,500 for dependent students, 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 after July 1, 2022 and before July 1, 2023, the rate for direct subsidized and unsubsidized undergraduate loans is 4.99%, while the rate for graduate and professional programs is 6.54%.

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, 2023, 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 over 10 years.
  • Graduated: Payments begin lower and then gradually increase with time (generally every two years) for 10 years.
  • Extended: Payments can be fixed or graduated and intended to be paid off within 25 years. Borrowers must have at least $30,000 in direct loans.
  • Income-driven: Payments are based on your income and can range from, generally speaking, 10% to 20%. However, payments may never be more than someone would have paid on the standard repayment plan. The payment amount will be recalculated each year based on family size and discretionary income.

Income-driven repayment plans include the following:

  • Revised pay as you earn repayment (REPAYE): Direct loan borrowers with an eligible loan can qualify. Monthly payments are generally 10% of discretionary income and are recalculated annually based on your updated income and family size.
  • Pay as you earn repayment (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 generally 10% of discretionary income.
  • Income-based repayment (IBR): Eligible borrowers must have a high debt-to-income, and monthly payments are generally 10% if you're a new borrow on or after July 1, 2014, and generally 15% if you're a new borrower before July 2014. In both cases, your monthly payments are never higher than what they'd be in ther standard repayment plan.
  • Income-contingent repayment (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 for, subsidized and unsubsidized Stafford loans, and federal family education loans (FFEL). The monthly payment is based on annual income and 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.

Frequently Asked Questions (FAQs)

What are Stafford loans?

Stafford loans are loans the Department of Education offers to undergraduate and graduate students. They come in two types: subsidized and unsubsidized.

What is an unsubsidized Stafford loan?

An unsubsidized Stafford loan is a loan for which the government does not pay your interest while you are in school, during your grace period, or during a deferment. This is the opposite of subsidized loans, for which the government pays your loan interest while you're in school, a grace period, or deferment.

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  2. Penn State Student Aid. "Loan Amounts for Direct Subsidized and Unsubsidized Loans."

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

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

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

  6. Federal Student Aid. "Repayment Plans."

  7. Federal Student Aid. "Repayment Plans."

  8. Federal Student Aid. "Income-Drive Repayment Plans."

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

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