Federal family education loans

The FFELP is a Federal Government private lender partnership scheme and umbrella program that includes Stafford loans, PLUS loans and Perkins loans. Setup by an Act of Congress in 1965, it began operation in 1966 and since this time over half a trillion dollars in money has been disbursed in federal student loans with over $50 billion alone in 2006.

Money for Stafford loans, PLUS loans and other FFELP loans are provided through a large national network of credit unions, independent banks and other financial institutions. Lenders will feel confident loaning dollars to what otherwise may be high credit risks because the money is in the end guaranteed via the Federal Government.

Stafford loans

Over 90% of the funds are directed by the two types of Stafford loan, unsubsidized & subsidized. In the second circumstance the Federal government pays the interest on the loan accrued whilst the student is in school and for a further six months afterwards. Unsubsidized loans require the borrower to be responsible for any interest. If the interest is deferred, as it most is often until after the grace period, it is then added to the primary total.

PLUS loans

The other major plan, the PLUS (Parent Loans for Undergraduate Students) loan plan, supplies over $8 billion per calendar year in money to parents. As of July 1, 2006 professional and graduate students are also eligible for PLUS loans, providing dollars to parents to assist cover expenses they would frequently pay for anyway. The PLUS program commonly forms part of the total financial aid package today.

FAFSA

Chiefly, all the services need a FAFSA (Free Application for Student Aid) application to be filled out. The data provided forms the core information that allows loan officers to make their funding decision. Typically, those decision makers are employed through the individual college at which the student is accepted. The financial aid department will make a suggestion for a package based in part on the EFC (Expected Financial Contribution) of the student and his or her parent(s). By analyzing income, they aim to supplement any unmet need with combinations of subsidized and unsubsidized Stafford loans and other sources.

Once the student and/or parent accept the package, the money is disbursed twice per year or once each semester. Ordinarily, the biggest share of the funds goes directly from the private lender to the school to pay for tuition. The remainder is then provided to the student or parent, minus any charges. These fees may range up to 4% or more; several schemes will charge a 3% origination fee and a 1% insurance fee, which they assign to the requirements of the Federal government. Fees have been as high as 8%.