Among undergraduates who borrowed in 1999–2000, nearly all (97 percent) took out federal student loans; 13 percent took out nonfederal loans, usually in combination with federal loans. The average federal student loan was $4,600.

The largest source of federal student loans is the Stafford loan program, which offers students two types of loans, subsidized and unsubsidized. Subsidized Stafford loans are awarded on the basis of need and are interest free to students while they are enrolled. Unsubsidized Stafford loans require no need test, but charge interest while students are enrolled. Depending on their financial need, students may receive subsidized loans, unsubsidized loans, or both types. Stafford loans have annual loan limits that vary by students’ class level and dependency status. Students may borrow more at higher class levels, and independent students may borrow about double the amount available to dependent students at the same class level.

About one-half (47 percent) of Stafford borrowers took out need-based subsidized loans only, 17 percent took out unsubsidized loans only, and 36 percent took out both. Independent undergraduates were more likely than dependent undergraduates to take out a combination of subsidized and unsubsidized loans (58 percent vs. 21 percent), and the average Stafford loan was higher for independent than for dependent undergraduates ($5,500 vs. $3,800). Among dependent Stafford borrowers, 69 percent borrowed the maximum annual amount. Among independent borrowers, whose annual loan limits were about double those for dependent borrowers, 27 percent borrowed the maximum.