What is a Stafford Loan?

The U.S. Department of Education administers the Federal Family Education Loan (FFEL) Program of which the Stafford Loan program is part of. Funds for your FFEL program loans will come from a bank, credit union, or other lender that participates in the program.

There are two types of Stafford Loans, subsidized or unsubsidized. A subsidized loan is awarded on the basis of financial need. If you're eligible for a subsidized loan, the government will pay (subsidize) the interest on your loan while you're in school, for the first six months after you leave school, and for any period you qualify to have your payments deferred.

An unsubsidized loan is not based on financial need. Your school will subtract the total amount of your other financial aid from your cost of attendance to determine whether you're eligible for an unsubsidized loan. Unlike a subsidized loan, you are responsible for the interest from the time the unsubsidized loan is disbursed until it's paid in full. You can choose to pay the interest as it accrues or allow it to accumulate and be added to the principal amount of your loan (capitalization) at the time your loan enters repayment. Capitalizing the interest will increase the amount you have to repay.

You can receive a subsidized loan and an unsubsidized loan for the same enrollment period as long as you don't exceed the annual loan limits.