Direct federal Stafford loans are low-interest loans for eligible students. They help cover the cost of higher education at a four-year college or university, community college or trade, career or technical school. Eligible students borrow directly from the U.S. Department of Education at participating schools. Direct federal Stafford loans are part of the Federal Direct Loan Program.

There are two types of Stafford loans: subsidized and unsubsidized. Both require that you complete the Free Application for Federal Student Aid (FAFSA) to determine if you are eligible to apply for a loan.

All Federal Direct Loan Program loans require that you be enrolled in at least six hours to be eligible to borrow or defer repayment.

Direct Subsidized Loan

A subsidized Stafford loan requires that you meet a needs test in order to be eligible for the loan award. Interest rates are set by Congress and are generally lower than those in the current private loan market.

The federal government will pay the interest on the loan while you are enrolled in school in at least six hours.  However, effective July 1, 2012, the federal government will no longer pay interest on subsidized loans during the six month grace period after you drop below six credit hours or completely withdrawal from school If the loan was disbursed after July 1, 2012.
 
After the six-month grace period, you will be required to pay the loan and interest accrued. There are several repayment options available to you. Visit www.studentloans.gov for more information. In some instances, you can even have some of the loan obligation canceled or forgiven in return for teaching or public service.

Direct Unsubsidized Loan

Unlike a subsidized loan, an unsubsidized loan does not require you to demonstrate financial need. However, interest will accumulate from the time the loan is first paid out. (In other words, “unsubsidized” simply means that the federal government will not pay the interest on the loan while you are enrolled in school.)

You can pay the interest while you are in school and during grace periods and deferment or forbearance periods, or you can allow it to accrue and be capitalized. If you choose not to pay the interest as it accrues, this will increase the total amount you have to repay because you will be charged interest on a higher principal amount.

You must still complete the Free Application for Federal Student Aid (FAFSA) in order for your eligibility to be determine for subsidized and unsubsidized loans. Terms and conditions are explained in detail at www.studentloans.gov.