A Stafford loan is a federal student loan. Today it’s officially called a Direct Subsidized Loan or a Direct Unsubsidized Loan, and you don’t apply for it with a lender.
You apply by filing the FAFSA. Your school then offers you the loan in your financial aid package, you accept it, and you finish two short steps on studentaid.gov. There’s no credit check.
The short answer
- “Stafford loan” is the old name. The official names are Direct Subsidized and Direct Unsubsidized Loans.
- To get one, file the FAFSA, accept the loan in your school’s aid offer, complete entrance counseling and sign a Master Promissory Note.
- For loans first disbursed July 1, 2026 to June 30, 2027, the fixed rate is 6.52% for undergrads and 8.07% for grad students, with a 1.057% origination fee.
- Dependent undergrads can borrow $5,500 to $7,500 a year. Grad students are capped at $20,500 a year, and Grad PLUS is closed to new borrowers.
What a Stafford loan is now
Federal Student Aid says you might still see them called Stafford Loans or Direct Stafford Loans, but those aren’t the official names. The two loans you’d get as a student are:
- Direct Subsidized Loan
- For undergrads with financial need. The government pays the interest while you’re in school at least half time, during the six-month grace period after you leave, and during deferment.
- Direct Unsubsidized Loan
- For undergrads and grad students, with no financial need required. Interest starts building from the day the money goes out, and you owe all of it.
Most undergrads end up with some of each. Grad students only get unsubsidized loans.
Who can get one
You need to be enrolled at least half time at a school that takes part in the Direct Loan Program, and meet the general federal aid rules, like being a U.S. citizen or eligible noncitizen and keeping up satisfactory academic progress at your school.
You don’t need good credit, or any credit at all. If you’re an undergrad at a school that offers Pell Grants, your school has to check your Pell eligibility first, which is one more reason the FAFSA comes before anything else.
Not sure where you stand on citizenship? Talk to your school’s financial aid office. Some noncitizens qualify, and they can tell you if you do.
How to apply, step by step
- File the FAFSA on studentaid.gov. It’s free, and it’s the application for every federal grant and loan. You’ll need tax information for you and, if you’re a dependent student, your parents. When it’s processed you get a FAFSA Submission Summary with your Student Aid Index (SAI), the number schools use in place of the old Expected Family Contribution.
- Read your school’s financial aid offer. Your school decides how much you can borrow based on your year in school, your dependency status, your cost of attendance, your other aid, and the federal limits below.
- Accept all of it, part of it, or none. You don’t have to take the full amount. Borrow what you need for the year and leave the rest.
- Complete entrance counseling. First-time borrowers do this online at studentaid.gov. It covers how interest works and what repayment looks like.
- Sign the Master Promissory Note (MPN). This is the loan contract. At many schools one MPN can cover your loans for up to 10 years, so you may not have to sign it again each year.
- Watch for the disbursement. Your school disburses the loan money. If you change your mind, you can cancel all or part of the loan before it’s disbursed by telling your school, or within 120 days after by returning the money.
Next stepWant a bigger picture of paying for school? Our guide to the best private student loans starts with why federal loans come first.
Rates and fees for the 2026 to 2027 award year
The rate is fixed for the life of the loan, and it’s set by a formula in the law, not by your credit.
| Loan | Who it’s for | Fixed rate | Origination fee |
|---|---|---|---|
| Direct Subsidized | Undergrads with financial need | 6.52% | 1.057% |
| Direct Unsubsidized | Undergrads | 6.52% | 1.057% |
| Direct Unsubsidized | Grad and professional students | 8.07% | 1.057% |
| Direct PLUS (parents, and Grad PLUS for those who still qualify) | Parents and some grad students | 9.07% | 4.228% |
Those rates apply to loans first disbursed July 1, 2026 to June 30, 2027. Each new award year gets its own rate, but once your loan goes out, its rate never changes.
The fee comes out of each disbursement, so you get a little less than you borrow and still repay the full amount.
Subsidized vs. unsubsidized: what it costs you
This is where the difference really shows up. Here’s a first-year dependent student taking the max.
Example: first-year dependent undergrad
- Direct Subsidized
- $3,500
- Direct Unsubsidized
- $2,000
- Origination fees (1.057%)
- About $58
- Interest while in school on the subsidized loan
- $0
- Unsubsidized interest per year at 6.52%
- $130.40
- Unsubsidized interest after 4.5 years
- About $587
How we got it: $5,500 times 1.057% is about $58. $2,000 times 6.52% is $130.40 a year, and four years of school plus the six-month grace period is 4.5 years, or about $587. That assumes the full $2,000 is out the whole time, simple interest, and no payments while you’re in school.
On the subsidized $3,500 you’d owe nothing extra by the time repayment starts. On the unsubsidized $2,000 you’d owe about $2,587 unless you paid the interest along the way.
Can you afford to pay that interest while you’re in school? Even $11 a month on a $2,000 unsubsidized loan keeps it from piling up.
How much you can borrow
Undergrad limits didn’t change with the 2025 law. Grad limits did, a lot.
| Who | Yearly limit | Total limit |
|---|---|---|
| Dependent undergrad, first year | $5,500 (up to $3,500 subsidized) | $31,000 (up to $23,000 subsidized) |
| Dependent undergrad, second year | $6,500 (up to $4,500 subsidized) | $31,000 (up to $23,000 subsidized) |
| Dependent undergrad, third year and beyond | $7,500 (up to $5,500 subsidized) | $31,000 (up to $23,000 subsidized) |
| Independent undergrad (or dependent whose parent is denied PLUS) | $9,500, $10,500, then $12,500 (same subsidized caps) | $57,500 (up to $23,000 subsidized) |
| Graduate student | $20,500, all unsubsidized | $100,000, not counting undergrad loans |
| Professional student | $50,000, all unsubsidized | $200,000 |
There’s also a $257,500 lifetime cap on all federal student loans you take as a student, and it counts loans you’ve already paid off. If you’re enrolled less than full time, your yearly limit is reduced, and your school can set a lower limit for your program.
What changed for grad students
If you’re starting grad school now, federal loans probably won’t cover everything anymore.
Starting July 1, 2026, new grad and professional borrowers can’t get Grad PLUS loans, and the $20,500 and $50,000 yearly caps above apply. Students who were already enrolled with a federal loan for their program before then may keep the old rules for a limited time. No Grad PLUS loans will be made at all starting with the 2029 to 2030 award year.
A court has also paused part of the Education Department’s definition of a “professional degree”, so whether your program gets the $50,000 limit can depend on that. Your financial aid office is the place to ask.
Already have federal loans?
Any new Direct Loan first disbursed on or after July 1, 2026 means all of your Direct Loans get repaid under the Repayment Assistance Plan (RAP) or the Tiered Standard plan, including older loans. If you have older federal loans on another plan, ask your servicer how a new loan changes your options.
If there’s still a gap, compare private student loans for grad school only after you’ve used every federal dollar you can get.
Common questions
Yes. Stafford loans are now called Direct Subsidized Loans and Direct Unsubsidized Loans. Federal Student Aid says you may still see the Stafford name, but it isn’t the official name anymore.
No. Direct Subsidized and Direct Unsubsidized Loans don’t require a credit check. PLUS loans for parents and grad students are the federal loans that do.
For loans first disbursed July 1, 2026 to June 30, 2027, the fixed rate is 6.52% for undergraduate subsidized and unsubsidized loans and 8.07% for graduate and professional unsubsidized loans. The origination fee is 1.057%.
File the FAFSA, then accept the loan in your school’s financial aid offer. First-time borrowers also complete entrance counseling and sign a Master Promissory Note on studentaid.gov.
Yes. Before the money is disbursed you can cancel all or part of it by telling your school. After it’s disbursed, you can cancel within your school’s window or return the money within 120 days of disbursement.
Sources (9)
We use primary sources: Federal Student Aid, the U.S. Department of Education and the Federal Register.
- Federal Student Aid. Subsidized and Unsubsidized Loans. studentaid.gov. Accessed October 22, 2026.
- Federal Student Aid. Interest Rates and Fees for Federal Student Loans. studentaid.gov. Accessed October 22, 2026.
- Federal Student Aid. Definitions and Loan Limits. studentaid.gov. Accessed October 22, 2026.
- Federal Student Aid. Big Updates to Federal Student Loans. studentaid.gov. Accessed October 22, 2026.
- Federal Student Aid. Direct Loan Borrower’s Rights and Responsibilities Statement. studentaid.gov. Accessed October 22, 2026.
- Federal Student Aid. Federal Student Aid Handbook, Volume 8, Chapter 1: Student and Parent Eligibility for Direct Loans. fsapartners.ed.gov. Accessed October 22, 2026.
- Federal Student Aid. Release of Revised Federal Student Aid Estimator. fsapartners.ed.gov. Accessed October 22, 2026.
- Federal Register. Reimagining and Improving Student Education: Federal Student Loan Program Final Regulations. federalregister.gov. Accessed October 22, 2026.
- Federal Student Aid. Eligibility for Federal Student Aid. studentaid.gov. Accessed October 22, 2026.
