Federal Stafford Direct Loans

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Federal Stafford Direct Loans

There are two types of Federal Stafford Direct loans, Subsidized and Unsubsidized. Both loan types are originated and guaranteed directly by the U.S. Department of Education. Nearly all students are eligible to receive them (regardless of credit score or other financial issues). Both types of loans offer a grace period of six months, which means that no payments are due from the borrower until six months after graduation or enrollment of less than half-time.

Subsidized federal student loans are available to students who demonstrate a financial need. For these loans the federal government makes interest payments while the student is in college. For example, those who borrow $10,000 during college will owe $10,000 upon graduation.

Unsubsidized federal student loans also accrue interest but interest payments are not subsidized; rather the interest accrues during the student's time in college. Those who borrow $10,000 during college will owe $10,000 plus interest upon graduation. Interest will begin accruing immediately on the $10,000. The accrued interest will be "capitalized" into the loan amount; however, students can choose to pay the interest while still in college.

Effective July 1st, 2013 for all *first-time borrowers who are eligible for Direct Subsidized Loans, borrowers are eligible to receive Direct Subsidized Loans up to 150% of the published length of the borrower's current educational program. This has no effect on Direct Unsubsidized Loans or PLUS loan eligibility. For additional information on this new policy, please review the document below published by the Federal Student Aid.
150% Direct Subsidized Loan Limit

First-Time Borrower
Affects only first-time borrowers, as of July 1, 2013
  • First-time borrower has no outstanding balance of principal or interest on a Direct Loan or FFEL Loan
  • On July 1, 2013, or
  • On the date the borrower obtains a Direct Loan after July 1, 2013
  • Example: Borrower had a balance on July 1, 2013 but paid it off in full prior to receiving loans after July 1, 2013