Subsidized Federal Stafford Loans

The subsidized Federal Stafford Loan is a federal student loan available to students with demonstrated financial need. Subsidized loans are among the least expensive loan options for students because the federal government pays the interest while the student is attending college on at least a half-time basis and during other periods of authorized deferment. This interest subsidy effectively gives the loan a zero percent interest rate during the in-school and other deferment periods. In contrast, the government does not pay the interest on unsubsidized Federal Stafford loans.

(A comparison of subsidized and unsubsidized Federal Stafford Loans discusses other differences between subsidized and unsubsidized Federal Stafford loans.)

Subsidized Federal Stafford Loan Quick Facts

  • Interest rate of 4.29% for the 2015-2016 academic year
  • Interest is subsidized while the borrower is in school
  • Eligibility is based on financial need, as determined by the FAFSA
  • Cumulative loan limit of $23,000
  • Low origination fee of about 1%

Subsidized Loan Limits

Loan limits on the Subsidized Federal Stafford Loan are the same for dependent and independent students.

Undergraduate Grade Level
Subsidized Stafford Loan Annual Loan Limits
Freshman $3,500
Sophomore $4,500
Junior, Senior and Beyond $5,500
Cumulative Limit $23,000

Graduate and professional students are no longer eligible for subsidized Federal Stafford loans as of July 1, 2012. Previously they were eligible for up to $8,500 a year and $65,500 cumulative (including undergraduate subsidized Federal Stafford Loans).

Subsidized Loan Eligibility

Eligibility for subsidized Federal Stafford loans is based on criteria specified in the Higher Education Act of 1965. These include general eligibility criteria for federal student aid and loan-specific eligibility criteria.

To be eligible for any federal student aid program, the student must be:

  • A U.S. citizen or eligible non-citizen
  • Have received a high school diploma or the equivalent (e.g., GED)
  • Enrolled at least half-time in an accredited academic program
  • Not be in default on any existing federal student loan
  • Have financial need as determined by the FAFSA
  • Be an undergraduate student; Graduate students no longer qualify for subsidized Federal Stafford loans as of July 1, 2012.

How to Apply for Subsidized Loans

To apply for a subsidized Federal Direct Stafford Loan, students must file the Free Application for Federal Student Aid (FAFSA). Once completed, students will receive a financial aid notification (award letter) from their school detailing how much they are eligible to borrow in subsidized loans.