Understanding Stafford Loans

Stafford Loans are government-backed and secured loans available to undergraduates at low-interest rates. Offered under Title IV of the Higher Education Act of 1965, these loans are backed and secured through guarantee agencies. What this means is everyone who meets the eligibility requirements has a fair and equal opportunity to obtain one of these loans to pursue their higher education.

Stafford loans come in both subsidized and unsubsidized loans. With subsidized loans, interest is paid by the federal government while the student is still attending school and the grace period. Not every student will be eligible for subsidized loans. These loans are given to students who demonstrate a financial need.

Students need not make payments on the loan as long as they are still enrolled in school full-time. Once a student graduates or drops out of school, he or she is given a 6 month grace period before the loan is required to be paid back. As it common with loans, the student is required to pay the loan based on a monthly loan payment schedule. During the payment periods, interest rates may increase from a lower rate while the student was in school, to a higher rate once the grace period ends as Stafford loans are structured on a dual interest rate.

Post-graduation and grace period, students may be juggling several loans from various sources, including their Stafford loans. Many chose to apply for student loan consolidations to combine all loans into one easily managed account and reduce their monthly payment. Lenders and private student loan consolidation specialists may offer various incentives and discounted interest rates as they compete for a student's business. See our guide on Consolidation Student Loans for additional information.

1. Complete the FAFSA form - Before anything else, students are required to complete the Free Application for Federal Student Aid application for the appropriate academic year. The form is required for each semester of classes.
2. Must be a US citizen or eligible non-citizen - If you have yet achieved full citizenship status, you will not be eligible for any government backed loans. Additionally, if you're in the U.S. on an F1 or F2 student visa, a J1 or J2 exchange visitor visa, or a G series visa you are not eligible for a Stafford loan.
3. Must be enrolled in an institution of higher education - You must be enrolled and making satisfactory progress in some form of college or university, taking classes related to your field of study and seeking a degree.
4. Must be at least a half-time student - You must be attending college and classified as at least a half-time student.
5. Must NOT be in default of an education loan - Defaulting on a student loan, especially a Stafford loan, is the kiss of death for students. Not only will this adversely affect your credit status, it will continue to cause a ripple effect on your financial future. If you've defaulted on a student loan in the past, you've shown a tendency to be a risky and unreliable loan target, therefore you will be unable to be eligible for any government loans.
6. Be registered with the Selective Services - Selective services is a system in the US used to draft people into the armed services. Once a young man turns 18, he is required by law to register with selective services.
7. Have a valid Social Security Number - Social security numbers (SSN) acts as proof of US citizenship and is required when applying for a Stafford loan.
8. Have a financial need - Although not technically a requirement, the Stafford loan program is designed to assist those who have a financial need and whom otherwise could not afford to attend college without financial assistance.