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What is an Unsubsidized Stafford Loan?

By D.M. Abrecht
Updated May 16, 2024
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An unsubsidized Stafford loan is one type of federally backed student loan, available for students attending a qualified post-secondary educational institution. Unsubsidized Stafford loans are available from the federal government and from private lenders to both graduate and undergraduate college students in the United States. They are not need-based. Interest accrues on the loans from the date they are issued, but no payments need to be made while the recipient is enrolled in school.

Stafford loans are offered under both the Federal Family Education Loan Program (FFEL) and the William D. Ford Federal Direct Loan Program (Direct). The funds for Direct loans are provided by the U.S. government, while the funds for FFEL loans are provided by private financial institutions. All Stafford loans are guaranteed by the government, which allows them to be offered at lower-than-market interest rates. Their interest rates are presently fixed at the time of disbursement, and are regulated by the government.

No payments need to be made on Stafford loans while the recipient is enrolled in school at half-time credit or greater. During this time period, however, interest will accrue and capitalize on an unsubsidized Stafford loan. This is the principal difference between unsubsidized and subsidized loans; the federal government pays the interest on the latter while the recipient is still in school. For either type of loan, payments begin six months after the student graduates, leaves school, or falls below half-time enrollment.

To apply for Stafford loans, a student should fill out a Free Application for Federal Student Aid (FAFSA). Typically, a student will seek to receive as much aid as possible in the form of subsidized loans. These are awarded based on need, and are not ordinarily sufficient to cover the full cost of attending school. Once one's eligibility for subsidized loans is exhausted, it may be possible to receive additional funds in the form of an unsubsidized Stafford loan. The amount cannot exceed the total cost of attending college for that year, or a cap set by the federal government. Students must fill out a new FAFSA for each year in school.

The Stafford loans are named after Robert T. Stafford, a U.S. Senator from Vermont, in recognition of his work supporting collegiate education. The name change occurred in 1987. Prior to that, the loans were known as Guaranteed Student Loans (GSL). The first unsubsidized Stafford loan was authorized with the passage of the Higher Education Amendments of 1992. Earlier, only subsidized Stafford and GSL loans were available.

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