Stafford Loan

Stafford loans are a form of direct loans issued by the federal government. They come in two versions, subsidized and unsubsidized. These loans have lower interest rates than virtually all other loans for undergraduate studies and very low origination fees, so they should be high priority when paying for college. An undergraduate Stafford loan is either subsidized or unsubsidized, while a graduate Stafford loan is only unsubsidized.

Stafford Subsidized Loans

Stafford Loan Totals – Undergraduate (Dependent)
Subsidized MaxTotal Stafford Annually (Includes Max Subsidized)
Max Year 1$3,500$5,500
Max Year 2$4,500$6,500
Max Year 3+$5,500$7,500
Max Total$23,000$31,000
Stafford Loan Totals – Undergraduate (Independent)
Subsidized MaxTotal Stafford Annually (Includes Max Subsidized)
Max Year 1$3,500$9,500
Max Year 2$4,500$10,500
Max Year 3+$5,500$12,500
Max Total$23,000$57,500

Subsidized loans are offered to undergraduates on an as-needed basis. Subsidized loans are the second loans behind Perkins that should be used because their interest does not accrue during college. Essentially, subsidized loans are free money during college since interest does not accrue. The interest rate is currently 5.05% in repayment, which is very low when compared to other types of loans.

These loans vary in maximum amount available per year. As a freshman, the maximum amount available is $3,500 per year and then increases to $4,500 as a sophomore and then up to $5,500. Eligibility for subsidized loans is relatively simple to determine. If the cost of attendance is greater than the family’s expected family contribution (EFC) and other grants and scholarships received, then a Stafford subsidized loan will be awarded.

For Example:

Angie is a dependent first time freshman whose college costs $20,000 and her Expected Family Contribution (EFC) is $5,000. She receives $2,000 in grants. Angie has $13,000 that is still unfinanced when calculating loan amounts. Since $13,000 is greater than $3,500, Angie will be offered a Stafford subsidized loan worth $3,500. If the unfinanced portion is less than $3,500, then the subsidized loan will only be equal to the unfinanced portion.

$20,000 – $5,000 – $2,000 = $13,000 unfunded

Stafford Unsubsidized Loans

Stafford – Graduate (Only Unsubsidized)
Interest Accrues During Studies?Yes
Origination Fee$1.062%
Interest Rate6.60%
Max Annually$20,500
Max Total$138,500 (Including Undergraduate Stafford Loans)

Stafford unsubsidized loans are direct loans issued by the federal government that accrue interest during studies. They are offered to both undergraduate and graduate students. Unsubsidized loans are the third best loan to take for undergraduate since interest accrues on Stafford unsubsidized loans during your studies. For graduates, the origination fee is the same and the interest rate is 6.6%. This is higher than Perkins, so it would be the second best loan to take for graduate students since Stafford subsidized loans are not offered to graduates.

Eligibility for Stafford unsubsidized loans is different than subsidized. It takes the total cost of attendance and subtracts out aid received including grants, scholarships, and subsidized loans. This makes even those with high EFCs eligible for the loans in most cases since EFC is not used in calculating unsubsidized loan eligibility.

For Example:

Raz is a dependent undergraduate student whose college costs $20,000. His EFC is $5,000 and he received $10,000 in grants. Since EFC is not taken into account for calculating unsubsidized loans, he still has $10,000 left unfunded for unsubsidized loan calculations. Raz will receive the full $2,000 unsubsidized loan.

$20,000 – $10,000 = $10,000 unfunded


Stafford loans are very important because they are often the cheapest way to finance an education. Subsidized loans’ interest does not accrue in college, and both graduate and undergraduate Unsubsidized loans have lower interest than PLUS loans and private loans. Most students qualify for unsubsidized loans regardless of the family’s expected family contribution (EFC). LoanMajor’s calculators have you use Stafford loans before taking out more expensive loans to help you save money!