A Stafford loan is a government guaranteed student loan offering low interest rates and deferred payment options. There are 2 types of Stafford loans – subsidized and unsubsidized.

• Federal Family Education Loan Program (FFELP) loans are provided by private lenders, such as credit unions, banks and savings & loan associations.  These loans are guaranteed against default by the federal government.
• Federal Direct Student Loan Program (FDSLP) loans, administered by "Direct Lending Schools", are provided by the United States government directly to students and their parents.

All Stafford Loans are either subsidized (the government pays the interest while you are in school) or unsubsidized (you pay all of the interest, but you can have the payments deferred until after you graduate). To receive a subsidized Stafford Loan, you must be able to demonstrate financial need.

With the unsubsidized Stafford loan, you can defer the payments until after graduation by capitalizing the interest. This adds the interest payments to the loan balance, increasing the cost and size of the loan. All students, regardless of need, are eligible for the unsubsidized Stafford Loan.

Beginning on July 1, 2007, Stafford Loans allow dependent undergraduate students to borrow up to $3,500 in their freshman year (increased from $2,625), $4,500 in their sophomore year (increased from $3,500) and $5,500 for each remaining year (independent students and students whose parents have been turned down for a PLUS loan can borrow an additional unsubsidized $4,000 the 1st 2 years and $5,000 the remaining years). Graduate students can borrow $20,500 per year (increased from $18,500), but only $8,500 of that is subsidized. There are also cumulative limits of $23,000 for an undergraduate education and a $65,500 combined limit for undergraduate and graduate. (For independent students and for students whose parents were denied a PLUS loan the cumulative limits are $46,000 and $138,500, respectively.

Many students combine subsidized loans with unsubsidized loans to borrow the maximum amount permitted each year.