The two most common government-sponsored education (FFELP) loans are Stafford loans and PLUS loans. Stafford loans are given to students. The interest rate for Stafford loans is capped at 8.25 percent. There are strict limits on amounts that can be borrowed through this program. There are two types of Stafford loans: Subsidized and Unsubsidized.
Unsubsidized Stafford loans are available to students regardless of family income. Students are charged interest on an unsubsidized Stafford loan from the time the loan is disbursed until it is paid in full. If the interest isn’t paid as it accrues, it will be capitalized. This means the interest will be added to the principal amount of the loan, with additional interest based upon the higher amount.