Stafford Student Loans: An Introduction

The Stafford student loans were created by the US Higher Education Act of 1965. Since they are guaranteed by the Dept of Education, these loans enjoy a much lower interest rate than the commercial rates prevalent in the market. This makes them an ideal choice for financing your higher education.

However, it is not too easy to get Stafford student loans. There are quite strict barriers for eligibility, and even after you get through those, the actual amounts disbursed have hard limits.

Applying for It and Getting It

To apply for Stafford student loans, you need to fill out the FAFSA (Free Application for Federal Student Aid) form. Your application will then be reviewed by authorized government agencies, and your actual needs assessed against those of other candidates.

The disbursement of Stafford student loans is done directly by the Dept. of Education, or indirectly through private channels under a program known as FFELP (Federal Family Education Loan Program). The Stafford student loans are issued directly to the student, and the disbursed amount will vary according to your actual needs.

Giving It Back

The repayment of Stafford student loans is deferred till you're out of school, and normally starts six months after your graduation (or after you have dropped out). The rate of interest is lower during this grace period, and will rise when repayments begin. If you're in special need, there is also a government provision to waive the interest for the grace period. In effect, the interest for that period is paid by the Dept of Education on your behalf. This is known as a subsidized Stafford loan.

The interest rate for Stafford student loans during repayment was previously tied to certain national economic variables, like the 91-day treasury bill rate. However, since July 1 2006, they have become fixed at 6.8% per annum.