Stafford loans, also known as direct loans, are a certain type of government-issued, fixed-rate student loan that is available to students who are enrolled at least half-time in any undergraduate, graduate and professional programs. They fall under the William D. Ford Federal Direct Loan Program umbrella and their main goal is to facilitate higher education by boosting personal and family resources. In addition to scholarships, grants, and work-study programs, these Stafford loans are used to cover education costs, including tuition, books, room and board, and other necessary school fees.
Previously, the Federal Family Education Loan Program administered Stafford loans, but since July 1, 2010, the U.S. Department of Education has taken over. Now known as the William D. Ford Federal Direct Loan Program or simply, Federal Direct Loans, they encompass what we previously referred to as Stafford loans.
These federally-backed student loans can either be subsidized (the government covers the interest under specific circumstances) or unsubsidized. Direct subsidized loans are geared towards undergrads who have clear financial need. On the other hand, direct unsubsidized loans are open for both undergraduate and graduate students without the requirement of demonstrated financial strain. The maximum loanable amounts vary with the student's year level and dependency status.
Before being able to apply for these federal loans, students must first be admitted to a college or university that is accredited and eligible for federal loans. Then, it's necessary to complete the Free Application for Federal Student Aid (FAFSA). This ensures that students use the loan to pay for an education at an institution that is recognized by the government.
In comparison to private loans, Stafford loans usually have lower interest rates. Uniquely, there's often no need for a credit check with this type of federal student loan. Additionally, students aren't required to begin repayments until they either graduate, leave school, or switch to less than a half-time status.
Just a note of caution – Stafford loans, unlike grants, do require repayment. As with any other type of student loan, these loans, whether subsidized or unsubsidized, will influence your credit score. The total student loan amount and the history of the loan repayments will be a part of your credit history.