The Establishment of the Robert T. Stafford Federal Student Loan Program

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The Establishment of the Robert T. Stafford Federal Student Loan Program


By: Robert T. Stafford

Date: November 8, 1965

Source: Stafford, Robert T. "The Establishment of the Robert T. Stafford Federal Student Loan Program." Title 20, Chapter 28, Subchapter IV. U.S. Code, November 8, 1965.

About the Author: Robert T. Stafford (1913–), a retired Republican politician from Vermont, served as the Governor of Vermont from 1959–1961 and in the United States House of Representatives (1960–1971) and Senate (1971–1989).


Until the 1950s, students enrolled in colleges and universities had few choices for financing their education. Scholarships, small government grants, and parent or student savings were the standard options; student loans were rare and generally administered as personal loans to parents from local banks. The G.I. Bill, which granted educational support to veterans, changed the landscape of higher education after World War II, as tens of thousands of veterans returned home from the war to enroll in universities and colleges, funded by the federal program.

Shortly after WWII, the federal government passed the National Defense Act, which offered low-interest loans to students entering into the sciences or mathematics in college. The program is now called the Federal Perkins Loan program, and the loans are made available to low-income students. In the late 1950s, economists such as University of Chicago professor Milton Friedman advocated providing direct loans for college students to help subsidize education. The Health Education Assistance Act of 1963 established loan programs for students of medicine and those studying public health, while the College Work Study Program, established in 1964, offered jobs to students that were federally subsidized, giving colleges and universities a ready labor force and students an opportunity for on-campus jobs. The 1965 Educational Opportunity Grant Program offered direct grants to lower-income students, and the Guaranteed Student Loan program, later renamed the Stafford Loan, followed.

While some states had loan programs, a federal student loan program gained momentum in the early 1960s and became part of the Higher Education Act of 1965. Championed by Vermont Republican Robert T. Stafford, the program was aimed at the lower and middle classes. Making higher education more accessible for greater numbers of students who were not veterans was viewed as a positive step in developing industry, maintaining scientific progress during the Cold War, and helping universities—which had expanded to meet the needs of veterans after WWII— to maintain high enrollments.

As greater numbers of African Americans and minority students, as well as female students, made their way through high school and on to college, student loan programs could also help these students to gain access to higher education.



  • Purpose; discrimination prohibited
    1. Purpose

      The purpose of this part is to enable the Secretary—

      1. to encourage States and nonprofit private institutions and organizations to establish adequate loan insurance programs for students in eligible institutions (as defined in section 1085 of this title),
      2. to provide a Federal program of student loan insurance for students or lenders who do not have reasonable access to a State or private nonprofit program of student loan insurance covered by an agreement under section 1078(b) of this title,
      3. to pay a portion of the interest on loans to qualified students which are insured under this part, and
      4. to guarantee a portion of each loan insured under a program of a State or of a nonprofit private institution or organization which meets the requirements of section 1078(a)(1)(B) of this title.
    2. Discrimination by creditors prohibited

      No agency, organization, institution, bank, credit union, corporation, or other lender who regularly extends, renews, or continues credit or provides insurance under this part shall exclude from receipt or deny the benefits of, or discriminate against any borrower or applicant in obtaining, such credit or insurance on the basis of race, national origin, religion, sex, marital status, age, or handicapped status.

  • Designation

    The program established under this part shall be referred to as the "Robert T. Stafford Federal Student Loan Program." Loans made pursuant to sections 1077 and 1078 of this title shall be known as "Federal Stafford Loans."


The loan program, informally known as the Guaranteed Student Loan or Stafford Loan program, offered federal government guarantees should students default. In addition, the program, created the year after the landmark Civil Rights Act of 1964, expressly forbids discrimination on the basis of race, sex, national origin, religion, or marital status.

The Stafford Loan program offers subsidized and unsubsidized student loans. For students in lower income brackets, the government pays for the interest, in effect giving the student a zero-interest loan. Such opportunities opened the door to college for many lower-income families, changing the demographics at mostly state-supported schools. At the same time, student loans became available for training in the professions, such as medicine and law, allowing people in lower income brackets access to an education that otherwise might have been out of reach.

While student loans such as the Stafford Loan helped to open doors to colleges and universities for many students who otherwise might never have gained access, critics of the massive student loan culture in American colleges and universities point to the federal government's shift of the cost of higher education from the government to the individual. Student loans rarely can be discharged in a bankruptcy, and for students who assume large loans but drop out of college before receiving a degree, the resulting lack of a degree coupled with massive debt can be life-altering. Private lenders have joined federal programs in making student loans available to a wider audience, providing educational access while designing twenty-year and even thirty-year loan repayment plans.

As a percentage of total aid, student loans have climbed sharply while government grants, such as the Pell Grant, increased by seventy-three percent between 1995 and 2004. During the same time period, college tuition rose five to six percent per year, devaluing the Pell Grant and forcing students to make up the difference with increased earnings from work or, in most cases, student loans. Student loan borrowing reached an average of $17,600 for students graduating from state-sponsored colleges in 2004, and nearly $24,000 for those graduating from private college. In a 2002 survey of student loan holders, thirty-eight percent said that their student loans prevented them from buying a home, and twenty-one percent delayed having children because of their high student loan debts.



Cohen, Arthur M. The Shaping of American Higher Education: Emergence and Growth of the Contemporary System. San Francisco: Jossey-Bass, 1998.

Pulliam, John D. and James J. Van Patten. History of Education in America. Upper Saddle River, N.J.: Prentice Hall, 2002.

Thelin, John. A History of American Higher Education. Baltimore, Md.: The Johns Hopkins University Press, 2004.

Web sites

The Christian Science Monitor. "For Graduates, Student Loans Turn into an Albatross." <http://www.> (accessed June 18, 2006).

National Student Loan Data System. <http://www.nslds.> (accessed June 18, 2006).

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The Establishment of the Robert T. Stafford Federal Student Loan Program

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