How Stafford Loans Work

Paying Back Your Stafford Loan

Once you complete your studies and begin your career, you'll need to budget carefully and work out a plan to repay your loan. The repayment period for a Stafford loan is usually 10 years.

Fortunately, Stafford loans allow a six-month grace period once you've graduated, left school or decided to enroll less than half time. During this time, you'll receive repayment information that will include your first payment due date.

You can choose from one of the following repayment plans:

  • The standard repayment plan requires you to pay a fixed amount each month based on your principal and interest, but will be no less than $50 or the interest that has accrued.
  • The graduated repayment plan allows you to make lower payments at the beginning, but payment amounts will rise over time. This plan makes sense if you believe your income will rise significantly as your experience increases.
  • The income-sensitive repayment plan bases your monthly payment on your annual income and loan amount. The payment may change as your income rises or falls. This plan could be a good option if your income is based on sales commissions or market conditions.
  • The extended repayment plan is for borrowers with loans totaling more than $30,000, and allows you to extend your repayment period up to 25 years [source: Student Loan Network].

Payments are usually due monthly, and they're paid to a private lender or loan servicer. If you choose to repay your loan balance early, perhaps with extra funds received from an inheritance or bonus, there are no penalties for early payment and you can reduce the amount of total interest.

If you're having problems paying back your loan, you may quality for a deferment period on your loan during which no payments will be required. If you're unable to make payments temporarily, perhaps due to poor health or job loss, your lender may be able to grant forbearance for a specified period.

Finally, you may wonder if there are ever any conditions when your student loans may be cancelled or forgiven. It's possible, but only under very specific circumstances, such as death, disability, bankruptcy, or service in certain professions. It's best to take responsibility for repaying that student loan, budget accordingly, build a solid credit history and help make it possible for the Stafford loan program to continue to back low-interest loans for students.

Related HowStuffWorks Articles


  • Androitis, Annamaria. "Stafford Loan Rates are Falling." The Wall Street Journal. February 14, 2010. (February 24, 2010)
  • Androitis, Annamaria. "College Decision Time: Sizing Up Financial Aid." SmartMoney. April 7, 2009. (February 24, 2010)
  • "Stafford Loans." Student Aid on the Web. U.S. Department of Education. (February 25, 2010)