Stafford Loan

DEFINITION of 'Stafford Loan '

A type of federal, fixed-rate student loan that was available to college and university undergraduate and graduate students attending college at least half-time. Now such loans are given out under the William D. Ford Federal Direct Loan Program, which is intended to supplement existing personal and family resources available for higher education costs, including scholarships, grants and work-study. These loans can be used to pay for the costs of education, including tuition, room and board, books, and other education-related expenses.

BREAKING DOWN 'Stafford Loan '

A federal direct subsidized loan is a federally guaranteed loan that is based on financial need. Depending on circumstances, students may borrow larger amounts, but the maximum amounts that may be subsidized 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 senior or fifth-year students.

Students must first be accepted to a college or university accredited to accept federal loans and complete the Free Application for Federal Student Aid (FAFSA) prior to applying for the loan. The William D. Ford Federal Direct Loan Program also offers direct unsubsidized loans that are not given on the basis of financial need. In order to use any federal loan to pay for your education, you must be enrolled in a program offered by an accredited school. Click here to see whether the school you are considering is accredited for federal loans.

Under a previous program run by the Federal Family Education Loan Program, these types of federal student loans were known as Stafford loans. Effective July 1, 2010, all new federal student loans started coming directly from the U.S. Department of Education (ED) under the William D. Ford Federal Direct Loan Program (Federal Direct Loans).

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