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What is a Federal Stafford Loan?

A Stafford Loan has the following characteristics:

Available to any student meeting FAFSA eligibility requirements

Subsidized Stafford: If you can demonstrate unmet financial need after Pell grants and other financial aid are factored in, the federal government will pay your interest while you’re in school at least half time, for the six months after you leave school, and during a period of deferment.

Unsubsidized Stafford: Available regardless of your financial need or family income, interest begins accruing immediately and repayments must begin within 60 days of the borrowing unless you elect to defer repayments (along with capitalized interest) until after graduation.

Low variable interest rates on Stafford loans originated before July 1, 2006:

1.87% from July 1, 2010 through June 30, 2011 for borrowers who are in
school, in their post-school grace period, or in deferment. Adjusted each
July 1 based on the 91-day T-bill rate plus 1.7%.

2.47% from July 1, 2010 through June 30, 2011 for borrowers who are in
repayment. Adjusted each July 1 based on the 91-day T-bill rate plus 2.3%.

Loans originated prior to July 1, 1998 are subject to different rates

Fixed interest rate of 6.8% for Unsubsidized Stafford Loans for school years 2006-07 and later, and for Subsidized Stafford Loans for the 2006-07 and 2007-08 school years.

Fixed interest rate of 6.0% for Subsidized Stafford Loans for the school year 2008-09, dropping incrementally in subsequent school years (5.6% for 2009-10, 4.5% for 2010-11, and 3.4% for 2011-12), but then reverting to 6.8% in 2012-13.

Subject to maximum borrowing limits (see below)

Your school may be able to process your application for a Stafford Loan with
borrowed funds coming straight from the federal government. This is typically
known as a Direct Stafford Loan. Another approach is to apply with a third-party
lender (bank, credit union, etc.) which makes its own loans but is protected
from loss through guarantees from the federal government. This alternative is
known as a FFELP Stafford Loan. (FFELP stands for the Federal Family Education
Loan Program). Both types of Stafford Loans carry the same interest rate and
have similar characteristics. You will be required to pay as much as 1.5% of the
loan amount in processing and guaranty fees. These fees are typically deducted
from the loan disbursement. With either the FFELP or Direct Stafford Loan, you
are required to submit a FAFSA prior to making application for the loan. Loan
proceeds are paid directly to your school from the lender or federal government.
Your school will apply the funds to your tuition account, with any excess applied
to other expenses, retained as a credit on your account, or refunded to you.
The repayment period can be as many as 10 years, not including periods of deferment
or forbearance.

Your borrowing limit with a Stafford Loan depends on which year
you are in at college, and whether you are considered a "dependent" student
or "independent" student under criteria established by federal law and the school’s
financial aid office. (If your parents are turned down for a Federal PLUS Loan,
you are automatically considered independent for this purpose).

Stafford Loan maximums
Student Level and Dependency Status	Maximum Stafford (Subsidized and Unsubsidized)	Maximum Subsidized
Dependent 1st year	$5,500	$3,500
Dependent 2nd year	$6,500	$4,500
Dependent 3rd or later year	$7,500	$5,500
Independent 1st year	$9,500	$3,500
Independent 2nd year	$10,500	$4,500
Independent 3rd or later year	$12,500	$5,500
Graduate/Professional	$20,500	$8,500
Medical	$40,500	$8,500

Lifetime limits
Student Level and Dependency Status	Maximum Stafford (Subsidized and Unsubsidized)	Maximum Subsidized
Dependent undergraduate	$31,000	$23,000
Independent undergraduate	$57,500	$23,000
Graduate/Professional	$138,500	$65,500
Medical	$224,000	$65,500

For more information: http://studentaid.ed.gov/students/publications/student_guide/index.html