What is a Subsidized Stafford Loan?

Allison Boelcke
Allison Boelcke
Repayment on student loans generally begins shortly after graduation.
Repayment on student loans generally begins shortly after graduation.

A subsidized Stafford Loan is a student loan offered to college students by the United States federal government. The loan has a fixed interest rate and can be used to cover tuition, room and board, books, or any other educational expenses. Unlike an unsubsidized Stafford Loan, the loan does not accrue interest while the borrower is attending college. The federal government subsidizes the interest of the loan while a student is in college at least half time. Once a student graduates from college, he or she begins paying on the loan.

The loan is not based on credit; however, a borrower is limited by his or her school as to the amount he or she can borrow each school year. If a student already has his or her expenses covered by other scholarships, grants, or loans, the college may limit the student’s eligible amount. The amount of money loaned may also increase as a student advances in college levels. For instance, a senior or graduate student may be awarded for twice as much as a freshman.

To be eligible for a Subsidized Stafford Loan, a student must be a United States citizen or an eligible non-citizen, such as a legal refugee. Applicants are required to have graduated from high school or passed an equivalency examination. The federal government also requires borrowers to complete the Free Application for Federal Student Aid (FAFSA), a form that records the financial means of the borrower’s parents to determine how much they can afford to contribute to tuition.

If the borrower’s parents are found to make enough money to fund the tuition, the borrower may be eligible for little to no federal government aid. A subsidized Stafford Loan cannot be used if parents have the financial means but opt not to contribute to a student’s college education due to personal objections, such as disapproval of the college’s religious affiliations or location. In that instance, a student could apply for private loans or scholarships.

Once a student is found to be eligible for federal tuition assistance, he or she can apply for a subsidized Stafford Loan through his or her college. After a student is approved, the money can be deposited into the student’s school account or sent in the mail as a personal check. To keep up his or her eligibility, a student must stay enrolled at an accredited college or university program at least half time. The borrower begins paying off the loan after graduation or the agreed deferment period set in the loan agreement.

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    • Repayment on student loans generally begins shortly after graduation.
      Repayment on student loans generally begins shortly after graduation.