The federal Stafford loans and the Parent Loan for Undergraduate Students (PLUS) are part of the Federal Family Educational Loan Program (FFELP). There are two types of Stafford loans: subsidized and unsubsidized. Both require that you complete the Free Application for Federal Student Aid (FAFSA) before you can apply for a loan.

All FFELP loans require that the student be enrolled in at least six hours in order to be eligible to borrow or defer repayment.

Subsidized Stafford Loan

A subsidized Stafford loan requires that the student 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 the student is enrolled in school and for up to six months after the student finishes or leaves school.

After the six-month grace period, the government will stop paying the interest, and the student will be required to repay the loan and any interest that accrues from that point forward. A student generally has up to 10 years to repay the Stafford loan. However, there are repayment options and deferments that may extend the repayment period longer, if necessary. In some instances, a student can even have some of the loan obligation canceled or forgiven in return for teaching or public service.

Unsubsidized Stafford Loan

“Unsubsidized” simply means that the federal government will not pay the interest on the loan while the student is enrolled in school. Students do not have to meet a needs test in order to qualify for an unsubsidized Stafford loan.

However, the student must still complete the Free Application for Federal Student Aid (FAFSA) and be found ineligible for a subsidized Stafford loan before becoming eligible for the unsubsidized loan. Terms, conditions and repayment benefits of the loan are essentially the same as those of the subsidized loan.

Parent Loan for Undergraduate Students (PLUS)

Parent Loans for Undergraduate Students (PLUS) enable parents with good credit histories to borrow for the education expenses of each child who is a dependent undergraduate student enrolled at least half time.

The yearly limit on a PLUS loan is equal to the student’s cost of attendance minus any other financial aid he or she receives. Eligibility requirements include enrollment for at least six credit hours.