Federal Stafford Loan Program
The Federal Stafford Loan Program allows you to borrow money with low interest for educational expenses. Effective July 1, 2010, all new federal student loans come directly from the U.S. Department of Education (ED) under the William D. Ford Federal Direct Loan Program (Federal Direct Loans).* The financial aid office at the college you attend will assist you with the loan application process, if you decide to borrow.
There are two types of Federal Stafford Loans available: subsidized and unsubsidized. Eligibility for subsidized Federal Stafford Loans is based on financial need, and the federal government pays the interest on your behalf on loans while you are enrolled at least half time, during the six-month grace period and during authorized deferment periods. You are responsible for paying the interest during repayment. Eligibility for unsubsidized Federal Stafford Loans is not based on financial need, but you are responsible for paying interest at all times. You may pay this interest while in school, or you can allow it to accrue and it will be added to your principal balance to be paid off with the rest of your loan when you stop attending on at least a half-time basis.
* Before July 1, 2010, Stafford, PLUS, and Consolidation Loans were also made by private lenders under the Federal Family Education Loan Program.
To be eligible, you must:
- Be a U.S. citizen or an eligible non-citizen
- Have a high school diploma or GED certificate
- Attend college on at least a half-time basis, and be working toward an eligible degree or certificate (see the Additional Information on Loan Limits section of this page for possible exceptions to this requirement)
- Comply with federal Selective Service registration requirements
- Not be in default on any student loan, nor owe a refund on any state or federal grant. If you are in default, you may re-establish your eligibility.
- Maintain satisfactory academic progress as determined by your college
How to Apply
The application process for both subsidized and unsubsidized Federal Stafford Loans begins with completing the online Free Application for Federal Student Aid (FAFSA). In order to be eligible for the unsubsidized Federal Stafford Loan, your college will first determine your eligibility for the subsidized loan. Check with your college’s financial aid office to determine if any additional forms are needed. The financial aid administrator at your college determines your eligibility for both loan types.
Once determined eligible, your school will submit your student loan information to ED. Before loan funds can be disbursed to the school on your behalf, you must complete and sign a Master Promissory Note (MPN). An MPN is a legally-binding document on which you promise to repay the funds disbursed, plus interest. Borrowers with previously-signed MPNs for loans made through the Federal Family Education Loan Program will need to sign a new MPN if they borrow through the Direct Loan Program.
Eligibility Formulas - Subsidized Stafford Loan
|Cost of attendance|
|-||(MINUS) expected family contribution (determined by completing your FAFSA)|
|-||(MINUS) Other financial aid you’re expected to receive (grants, scholarships, Federal Work-Study, other loans)|
|=||(EQUALS) Subsidized Federal Stafford Loan eligibility (not to exceed the program loan limit maximums)|
Eligibility Formulas - Unsubsidized Stafford Loan
If you have limited or no subsidized Federal Stafford Loan eligibility, the financial aid administrator can determine if you are eligible for an unsubsidized Federal Stafford Loan.
|Cost of attendance|
|-||(MINUS) Other financial aid you’re expected to receive (including a subsidized Federal Stafford Loan)|
|=||(EQUALS) Unsubsidized Federal Stafford Loan eligibility (not to exceed the program loan limit maximums)|
A chart, which conveniently outlines Federal Direct Loan limits, interest rates and applicable fees in one document (for loans first disbursed on or after July 1, 2014 through June 30, 2015), is available on this website. Specific details regarding each of these topics are provided in the following sections.
Federal Stafford Loan Limits
Maximum annual limits for undergraduate and graduate students are monitored by the college based on federal regulations. Below are the loan limits for loans disbursed on or after July 1, 2008. Aggregate limits include Federal Direct Loans and loans made through the Federal Family Education Loan Program.
|Annual Limits||Subsidized||Total (Subsidized & Unsubsidized)|
|Third Year and higher||$5,500||$7,500|
|Third Year and higher||$5,500||$12,500|
|Graduate and Professional Students||Not eligible||$20,500|
|Aggregate Limits||Subsidized||Total (Subsidized & Unsubsidized)|
|Graduate and Professional Students||$65,500||$138,500|
- Certain health professions students may qualify for increased loan limits depending on the program of study.
- Annual loan limits for undergraduate students are prorated.
- **Independent students may qualify for additional unsubsidized Stafford loan amounts. Dependent students may also qualify for additional amounts if determined eligible by the financial aid administrator or if the parents do not qualify for a Federal PLUS loan.
- Preparatory and Teacher Certification students may qualify for a Stafford loan, even if they are not enrolled in a degree program. See the U.S. Department of Education's Transition to Teaching page or contact your college's Financial Aid Office for details.
A federally mandated loan fee of 1.073 percent is charged on loan proceeds prior to disbursement.
Loans are generally disbursed in at least two installments, but qualifying colleges may make single disbursements for single-term (one semester, one trimester, one quarter or 4 months) loans. Check with the financial aid office at your college to learn how your loan(s) will be disbursed.
Loan proceeds are electronically transmitted to the institution.
You must start repaying on your subsidized Stafford loan six months after graduation, or after you drop below half-time enrollment. If you are responsible for paying the interest that accrues during that six-month grace period, the interest will be added to the principal amount of your loan when the grace period ends. If you have an unsubsidized Stafford loan, you will be responsible for paying the interest on your loan from the day it is disbursed (there are options for paying the interest). Like a subsidized loan, repayment of principal on an unsubsidized loan begins six months after graduation or after you drop below half-time enrollment.
Most student loan payments are set up on a standard repayment plan with monthly payments that remain the same throughout the repayment period. However, there are other plans available that may make your payments more manageable.
Deferment, forbearance and forgiveness (cancellation) options are available for both types of Federal Stafford Loans. Both principal and interest will be deferred on subsidized loans, while unsubsidized borrowers can defer only the principal portion of payments. Payment of interest on an unsubsidized loan during a deferment is your responsibility. The interest can either be paid on a monthly or quarterly basis, or it can be added into the principal balance of the loan at the time regular payments resume after expiration of the deferment. Contact your loan holder (the appropriate loan servicer for Federal Direct Loans, or your lender for loans made through the Federal Family Education Loan Program) to obtain the forms needed to apply for federal deferment, forbearance and loan forgiveness programs.
The State of Illinois also offers help with loan repayment for Illinois residents who qualify based on certain eligibility requirements. Further details are provided in the Loan Forgiveness Programs section of the After College area.