Direct Stafford Loans: How To Apply and Get the Most From Them

In the event you’ve utilized for pupil loans lately or are making use of quickly, there’s a superb likelihood that you simply’ll find yourself with a Direct Stafford mortgage. Greater than 33 million debtors within the U.S. have excellent Stafford Loans accounting for greater than $825 billion in pupil mortgage debt.

Proceed studying to be taught extra about Direct Stafford Loans, the different sorts out there, and how you can apply for a Direct Stafford Mortgage.

What’s a Direct Stafford Mortgage?

A Direct Stafford mortgage is a pupil mortgage originated by the federal authorities by means of the  William D. Ford Federal Direct Mortgage program. This system got here into existence on account of the Scholar Mortgage Reform Act of 1993 and is now the only largest supply of federal monetary help for faculty college students.

Earlier than the Direct Mortgage program, pupil loans have been nonetheless backed by the U.S. authorities however they typically got here from personal lenders. Direct Loans include mounted rates of interest set by the federal government that sometimes change yearly.

Forms of Stafford Loans

Two sorts of Direct Stafford Loans can be found — sponsored and unsubsidized. Each sorts of loans are awarded based mostly on monetary want, however fluctuate drastically on when curiosity is charged on the loans.

Direct Sponsored Loans

Direct Sponsored Loans can be found for undergraduate college students. With sponsored loans, the federal government pays the curiosity whilst you’re in class. The federal government additionally covers curiosity funds through the grace interval after leaving college and through deferment intervals.

Direct Unsubsidized Loans

With Direct Unsubsidized Loans, you — not the federal government — are liable for paying curiosity on the mortgage as quickly because the mortgage is disbursed. Curiosity begins to accrue from the distribution date till it’s fully paid off. Direct Unsubsidized Loans can be found for each undergraduate and graduate college students.

Direct Stafford Mortgage limits

The federal authorities limits how a lot you’ll be able to borrow yearly relying in your yr of attendance in class. The quantity progressively will increase as you get nearer to commencement.

12 months in Faculty

Dependent College students

Impartial College students

1st 12 months Undergraduate

$5,500 ($3,500 sponsored)

$9,500 ($3,500 sponsored)

2nd 12 months Undergraduate

$6,500 ($4,500 sponsored)

$10,500 ($4,500 sponsored)

third 12 months Undergraduate

$7,500 ($5,500 sponsored)

$12,500 ($5,500 sponsored)

Graduate or Skilled


$20,500 unsubsidized

Stafford Loans not solely have annual limits but additionally mixture, or complete, mortgage limits based mostly in your standing as a pupil. The Direct Stafford mixture mortgage limits for the 2020-2021 tutorial yr are as follows:

Mortgage Sort

Dependent College students

Impartial Undergraduate College students

Impartial Graduate or Skilled College students

Subidized Mortgage Restrict




Unsubsidized Mortgage Restrict




Whole Mortgage Restrict




Your mortgage’s mounted rate of interest additionally is determined by your standing as a pupil. At present, the rate of interest on Stafford loans on or after July 1, 2020, and earlier than July 1, 2021, are:

  • Undergraduates (sponsored and unsubsidized): 2.75%
  • Graduate college students (unsubsidized solely): 4:30%

The speed you obtain on federal pupil loans is mounted for the lifetime of the mortgage. The federal authorities additionally costs a mortgage charge on all Direct Stafford Loans.

The mortgage charge is a share of the full mortgage quantity and is deducted when the mortgage funds are disbursed. For loans disbursed on or after Oct. 1, 2019, by means of Sept. 30, 2020, the charge is 1.059%. Loans disbursed on or after Oct. 1, 2020, by means of Sept. 30, 2021, carry a 1.057% charge.

Methods to apply for a Direct Stafford Mortgage

The method to use for a Direct Stafford Mortgage isn’t difficult, however there are a number of steps to pay to your training with pupil loans. Observe these steps once you’re prepared to use for a federal pupil mortgage.

1. Submit the FAFSA kind

The Free Software for Federal Scholar Assist (FAFSA) is step one to receiving federal help to pay for faculty. Colleges use the data supplied on the shape to find out eligibility for federal grants, scholarships and pupil loans.

The federal deadline to submit your FAFSA kind for the 2021-22 tutorial yr is

June 30, 2022 (by 11:59 p.m. CT). If you’ll want to make corrections or replace info in your FAFSA kind, you should submit these adjustments by Sept. 10, 2022 (by 11:59 p.m. CT). Colleges and particular person states have their very own deadlines, so at all times verify with the right authorities earlier than beginning the method.

2. Overview your Scholar Assist Report

A Scholar Assist Report (SAR) is a abstract of the data you supplied in your FAFSA kind. Chances are high the data is appropriate, nevertheless it’s at all times a good suggestion to double-check for any errors or adjustments you could have to make earlier than it’s despatched to your required faculties.

3. Choose your federal help award

The faculties you listed on the FAFSA kind obtain your info and decide what applications you qualify for and the way a lot you’ll be able to borrow. These faculties will contact you with a college help supply.

You’ll be able to select to simply accept or decline the package deal they provide. In the event you aren’t glad with the supply, you’ll be able to enchantment the choice and request further funding. Name the varsity’s monetary help workplace for info on how you can file an enchantment.

4. Full entrance counseling

If that is your first federal pupil mortgage, you’re required to finish an additional step known as, “entrance counseling”. The entire course of takes about half-hour to finish and is accomplished on-line.

Entrance counseling walks you thru taking out federal pupil loans, together with your compensation choices, how curiosity works, and different vital info you’ll want to know.

5. Signal a Grasp Promissory Word

The method isn’t full till you signal a Grasp Promissory Word (MPN). The authorized doc is a contract between you and the U.S. Division of Schooling that claims you conform to repay your mortgage and any accrued curiosity and costs. The doc additionally spells out the phrases and situations of your mortgage.

Your college’s monetary help workplace can assist you all through the method if you happen to get caught. It’s a good suggestion to remain in contact with them anyway, to make sure all the pieces goes by means of correctly and also you’re set to attend when college begins.

Getting essentially the most out of your Stafford Loans

Nearly all of school college students take out loans to fund their training. In the event you plan to borrow cash to pay for faculty, exhaust federal mortgage choices earlier than looking for assist elsewhere.

Direct Stafford loans and different federal loans include particular advantages and applications meant to guard debtors. With federal loans, you’ve got entry to income-driven compensation plans, mortgage forgiveness applications, deferment and forbearance, and different perks you sometimes received’t obtain from a non-public lender.

In the event you nonetheless want extra monetary assist after maxing out federal pupil mortgage choices, you’ll be able to flip to different choices like personal pupil loans. Needless to say you’ll want to satisfy credit score and different necessities to qualify for personal loans, which is usually onerous for faculty college students due to an absence of credit score historical past and revenue. You would possibly want the assistance of a cosigner to get authorized for a non-public pupil mortgage.

The Backside Line

Simply because pupil loans appear to be a given for many school college students doesn’t imply that it’s a straightforward system to navigate. The monetary and life implications of including vital debt like pupil loans can stretch for many years, particularly if you happen to aren’t positive of one of the best path for you.

In the event you’re undecided what loans are finest for you, e-book a pre-debt seek the advice of with one among our pupil mortgage consultants. They work alongside you that will help you keep away from a few of the widespread errors college students make and create a compensation technique that’s manageable after graduating.

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