Direct Stafford Loans

The Direct Stafford loan is a type of financial aid granted from the United States government to students who file a Free Application for Federal Student Aid and show demonstrated financial need. The Direct Stafford Loan program is an evolution of the Guaranteed Student Loan Program, established in 1965, and was named after a Republican senator from Vermont who was highly honored and respected for his work on higher education reform.

At present, Direct Stafford student loans are available for both undergraduate students and graduate students.

Benefits of a Direct Stafford Loan

A Stafford loan is one of the best types of student loans you can get because they have fixed, relatively low interest rates.

Due to the fixed interest (meaning it doesn't change over the life of the loan), there is no chance of the annual percentage rate (APR) suddenly spiking due to the economy. The interest calculated on this loan will increase at the same rate through your entire repayment period — no sudden jumps of huge amounts of interest to pay off, unless you miss payments or go into default on the loan.

The Cost of a Direct Stafford Loan

To answer this question accurately, you first need to know that Stafford loans come in two flavors: unsubsidized and subsidized. Here is a quick reference chart for the differences between the two:

Direct Subsidized Undergraduate Stafford Loan

  • New subsidized loans are currently at 3.86% fixed for 2013-2014
  • Interest does not accrue while you are in school, or during your 6 month grace period after graduation — interest only starts to build once your loan goes into "repayment" status

Direct Unsubsidized Stafford Loan

  • Usually higher interest than subsidized, new loans currently at 3.86%; fixed for 2013-2014
  • Interest accrues while you are in school, and after you graduate

Applying for a Direct Stafford Student Loan

In order to apply for a Stafford loan, you first must fill out your FAFSA application for the upcoming academic year and be sure to list your school's federal code. Once the Department of Education receives this information, you will receive a Student Aid Report (SAR) within 2-3 weeks listing the financial aid for which you qualify.

If you qualify for Stafford loans, they will be automatically disbursed to the financial aid office of your college and applied to your student account. Note that not every school participates in the Direct Loan Program; some schools cannot meet the requirements to be part of the FDLP and have alternate financial aid arrangements for their students.