The Federal Family Education Loan Program

The Federal Family Education Loan Program (FFELP) is a governmental private lender partnership and umbrella student loan program that gives out federal student loans. This includes Stafford student loans, PLUS student loans, and Perkins student loans. The FFELP was established by an Act of Congress in 1965 and started in 1966. Ever since then, over half a trillion dollars have been given out as student loans, over $50 billion of which were given in 2006 alone.

The funds used for Stafford student loans, PLUS student loans and other FFELP student loans come from a wide number of independent banks, credit unions and other financial institutions. These lenders are confident enough to give out student loans despite high credit risks because the funds are theoretically guaranteed by the federal government.

Private guarantors may sometimes get involved, though, in those very few cases where student loans go into default. Guarantors will then go to the federal government for partial reimbursement of the funds they have lost.

The majority of these funds are put into two kinds of Stafford student loans: unsubsidized student loans and subsidized student loans. In unsubsidized student loans, the borrower is in charge of paying for the entire amount of interest. This amount includes the deferred interest until the grace period is over. In subsidized student loans, the government is in charge of paying for the interests on the student loan accumulated while the student is still in school until half a year after that.

The Parent Loans for Undergraduate Students (PLUS) student loan program gives out more than $8 billion per year to aid parents and, since July 2006, also professional and graduate students. Giving student loans to parents can greatly help pay for expenses that they would pay for anyway. The PLUS student loan program has since then become a big part of the world of financial aids today.

Generally, all student loan programs require a submission of the Free Application for Student Aid (FAFSA) application. The data collected from this application gives student loan officers an easier time in making funding decisions. These student loan decision makers are usually employed by the respective college itself, from which the student has been accepted. These forms are available at: http://www.fafsa.ed.gov/

Recommendations are made by the financial aid department mostly based on the Expected Financial Contribution (EFC) of the student and the parents. The income will be examined with the aim to supplement a student’s needs with a mixture of subsidized and unsubsidized Stafford student loans and other sources.