The terms of the loans are described in Title IV of the Higher Education Act of 1965 (with subsequent amendments), which guarantees repayment to the lender if a student defaults.
As with other types of federal financial aid, students who applied for a Stafford Loan were required to complete a FAFSA.
While the student was enrolled for at least half-time they were not expected to pay any principal payments on the loan, a status referred to as in-school deferment.
Deferment of repayment continued for six months after the student leaves school by graduating, dropping below half-time enrollment, or withdrawing, referred to as the grace period.
The interest on subsidized loans is paid by the federal government while the student is in school and during authorized deferment.
The Budget Control Act of 2011 eliminated subsidized Stafford loans for graduate and professional students effective July 1, 2012.