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Stafford Loans
Unlike a grant or scholarship, you have to repay a student loan. Student loans can be issued to either you or your parents. A Stafford loan is a federal loan program that is made directly to the student. Stafford loans come in two types: subsidized and unsubsidized.

Stafford loans are loans guaranteed by the federal government that are disbursed by a bank or other private lender that participates in the Federal Family Education Loan Program. The government may disburse the loan directly through the Federal Direct Student Loan Program.

A subsidized loan is a loan whose interest is paid by the federal government. An unsubsidized loan is one where you pay the interest on the loan. Since a subsidized loan is clearly the better deal, eligibility rules for these loans are much stricter than for unsubsidized loans. In order to be eligible for either type of Stafford loan, you must complete a Free Application for Federal Student Aid (FAFSA).

For the 2008-2009 academic year, first-year students who are dependent on their parents' support can borrow up to $3,500 in Stafford loans. If they are independent of their parents, they can borrow up to $7,500 in their first year. Second-year borrowing limits increase to $4,500 and $8,500, respectively. Third- through fourth-year borrowing limits increase to $5,500 and $10,500, respectively.

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