With tuition costs at record highs, and federal Pell Grants only covering a fraction of the cost, Stafford loans have grown in importance and serve as an essential ingredient for today’s students looking to fund their college education.

Since the late 70’s, tuition and fees at private four-year colleges have increased nearly tenfold. And while those fees have far outpaced inflation the same can not be said for the federal Pell Grant. The Pell Grant was created in 1976 to help aid lower-income students with the cost of higher education, but those funds don’t go nearly as far today as they once did.

When the Pell Grant program was first launched it covered about 70% of the cost of attendance at a typical four-year institution. Today the Pell Grant covers a mere 30% on average. One notable way students help bridge the widening gap between tuition costs and Pell Grant funds (for those who are eligible) is with the federal Stafford loan.

Stafford loans are federally backed and available to students attending Title IV certified schools. The loans, however, do hold yearly maximum allotments. The maximum allotments are determined by your year in school as well as your status (dependent or independent). Unlike Pell Grants, Stafford loans must be repaid after you graduate, and generally hold a 10-year repayment term. In addition, Stafford loans are divided into two categories, subsidized and unsubsidized.

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