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What Is a Stafford Loan?#
A Stafford Loan is a federally funded student loan for higher education, made available through the Federal Direct Student Loan Program. It comes in two forms, Subsidized and Unsubsidized, each with different rules about who pays the interest while you are in school.
Subsidized vs Unsubsidized Stafford Loans#
| Loan Type | Based on Financial Need? | Who Pays Interest While in School |
|---|---|---|
| Subsidized Stafford Loan | Yes | The government pays the interest while the student is in school and during deferment periods |
| Unsubsidized Stafford Loan | No | The student is responsible for all interest, which accrues from disbursal until full repayment |
Who Qualifies for a Stafford Loan#
To be eligible for a Stafford Loan, a student must be a U.S. citizen or national, a U.S. permanent resident, or an eligible non-citizen. The student must also be enrolled, or accepted for enrollment, at least half-time at a school that participates in the Direct Loan Program. Students who are in default on a Direct Loan, an FFEL Program loan or a Perkins Loan, or who owe an overpayment on a federal student aid grant or a Perkins Loan, generally do not meet these basic eligibility requirements unless they have made satisfactory arrangements to repay the loan or overpayment.
Signing the Master Promissory Note#
A student who is granted a Stafford Loan must sign a Master Promissory Note. This document is an agreement to all of the terms of the loan, and it must be signed before the loan can be disbursed.
How Much Can You Borrow with a Stafford Loan?#
The amount of money you can borrow with a Stafford Loan is based on your grade level and dependency status. Your dependency status will be determined by the school you are attending: regardless of your ability to live on your own and financially support yourself, your school may still deem you a dependent. This decision varies by student.
To continue receiving your Stafford Loan, you must re-apply for federal financial aid before each academic year. To re-apply, you must:
- File your FAFSA
- Receive your Stafford Loan award letter
- Accept your Stafford Loans and any other federal aid you may receive
How Stafford Loan Funds Are Paid Out#
Stafford Loan funds are sent directly to the student’s school, not to the student. The money arrives in two separate installments. The school uses the funds to pay tuition and fees first, and any money left over after that is refunded to the student.
When Stafford Loan Repayment Begins#
Repayment of a Stafford Loan is not required until 6 months after the borrower graduates, withdraws from school, or drops below half-time enrollment. This six month period gives borrowers time to find work or adjust their finances before payments start.
What to Do Next#
If you already have a Stafford Loan and are trying to figure out repayment, Cambridge Credit Counseling’s student loan counselors review your budget and the federal student loan repayment plans you may qualify for. Cambridge Credit Counseling’s student loan counseling covers federal student loans only and does not cover private student loans.
Common questions
What is the main difference between a Subsidized and an Unsubsidized Stafford Loan?
A Subsidized Stafford Loan is based on financial need, and the government pays the interest while the student is in school and during deferment periods. An Unsubsidized Stafford Loan is not based on financial need, and the student is responsible for all interest that accrues from disbursal until full repayment.
Do I need to be a full-time student to qualify for a Stafford Loan?
No. To be eligible for a Stafford Loan, a student must be enrolled, or accepted for enrollment, at least half-time at a school that participates in the Direct Loan Program. Full-time enrollment is not required.
What is a Master Promissory Note?
A Master Promissory Note is a document that a student granted a Stafford Loan must sign, agreeing to all of the terms of the loan. It must be signed before funds can be disbursed.
How does the school receive my Stafford Loan money?
Stafford Loan funds are sent directly to the student's school in two separate installments. Tuition and fees are paid first, and any remaining funds are refunded to the student.
When do I have to start repaying my Stafford Loan?
Repayment of a Stafford Loan is not required until 6 months after the borrower graduates, withdraws from school, or drops below half-time enrollment.
Where this information comes from
- 34 CFR 685.200 and Federal Student Aid Handbook 2026-27, Volume 1, Chapter 2 (U.S. Department of Education) ecfr.gov Checked 2026-10-19.
- Dear Colleague Letter GEN-25-04 and 34 CFR 685.214 and 682.402 as in force from July 1, 2020 (U.S. Department of Education) fsapartners.ed.gov Checked 2026-10-19.
- 34 CFR 682.209 and 685.208 (U.S. Department of Education) ecfr.gov Checked 2026-10-19.
- 34 CFR 685.219 (U.S. Department of Education) ecfr.gov Checked 2026-10-19.
- 34 CFR 685.209 (U.S. Department of Education) ecfr.gov Checked 2026-10-19.
- Why Seek Student Loan Counseling? | Cambridge Credit Counseling Checked 2026-10-28.
- 34 CFR 682.209 (U.S. Department of Education) ecfr.gov Checked 2026-10-19.
- Federal Direct Loans Explained: Cambridge Credit Counseling Guide (Cambridge Credit Counseling’s own information).
- Student Loan Counseling from Cambridge Credit Counseling (Cambridge Credit Counseling’s own information).
- Federal Perkins Loans: Repayment Rules | Cambridge Credit Counseling (Cambridge Credit Counseling’s own information).
- HEAL Loan Repayment Terms and Interest Rate | Cambridge Credit Counseling (Cambridge Credit Counseling’s own information).
- Credit Card Application Traps to Watch For | Cambridge Credit Counseling (Cambridge Credit Counseling’s own information).