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The William D. Ford Federal Direct Loan Program (also called FDLP, FDSLP, and Direct Loan Program) provides "low-interest loans for students and parents to help pay for the cost of a student's education after high school. The lender is the U.S. Department of Education ... rather than a bank or other financial institution."
Following the passage of the Health Care and Education Reconciliation Act of 2010, the Federal Direct Loan Program is the sole government-backed loan program in the United States. Guaranteed loans—loans originated and funded by private lenders but guaranteed by the government—were eliminated because of a perception that they benefited private student loan companies at the expense of taxpayers, but did not help reduce costs for students.
In 2011, the U.S. Department of Education transferred a large number of loans to the private conglomerate: Nelnet. Nelnet appears to be one of the sources of the many problems experienced in October 2011 with hosted website for a new platform for online servicing of federal student loans formerly handled by the government.
Political history
Congress passed a pilot version of the Direct Loan program as part of the Reauthorization of the Higher Education Act under President George H. W. Bush, Bush Signed it into law on July 23, 1992. Under President Bill Clinton the Omnibus Reconciliation Act of 1993 set up a phase in of direct lending. Many schools volunteered for the program, but the 104th Congress passed legislation to prevent the switch to 100% direct lending in 1994.[5] Funding for the Federal Direct Student Loan Program decreased from just over $7 billion in 2006 to $509 million budgeted for 2008.
Under the Obama Administration's new budget, all new loan originations will be under the Direct Loan program by July 2010, netting $6B in annual savings. The bill approving the measure passed the House of Representatives on September 17, 2009.[7] The switch to 100% Direct Lending effective July 1, 2010 was enacted by the Health Care and Education Reconciliation Act of 2010.
In comparison, other countries have also experimented with government-sponsored loan programs. New Zealand, for instance, now offers 0% interest loans to students who live in New Zealand for 183 or more consecutive days[8] (retroactive for all former students who had government loans), who can repay their loans based on their income after they graduate.[9] This program was a Labour Party promise in the 2005 general election.[citation needed]
Current Program Size
The Federal Student Aid (FSA) loan portfolio balances were $896 billion at the end of 2012.[10] The FSA managed $473 billion under the Federal Direct Student Loan Program at the end of 2012.[11] New loans originated under the program during 2012 totaled $106.7 billion.[12] Loan portfolio balances managed by the FSA for the Federal Family Education Loan Program are steady and slowly shrinking as new loans offered to students by the U.S. Department of Education originate under the FDSL program..[13] Most of the growth in FDSL loan portfolio balances can be attributed to new loan originations, while being the sole government program for student loans. Another contributor to the rapid escalation in loan balances is due to the cost of higher education increasing rapidly, faster than inflation. Students are spending and borrowing more to finance their higher-priced, higher education.
Possible Problems in the Future
Some believe that the growth of student loan debt is reaching problematic levels. Economists point to a drag on the economy as a whole because of high levels of student debt.[15] One way that has been suggested to help students with loan repayment is to lower interest on balances. U.S. Senator Richard Blumenthal urged,"We must reduce the student loan interest rate back to 3.4 percent immediately, and then even lower, and develop ways for past students to reduce and erase the $1 trillion in existing debt. The failure of Congress to act now threatens our all too slow and fragile economic recovery and job creation."[16] Another way to deal with debt to income levels is to require higher learning accountability. "Only recently have government regulators demanded accountability for the educational benefits universities produce and the efficiency with which they produce them: What does college cost? How many students are admitted? How many graduate? How long does it take them to graduate? How many get good jobs? At the same time, accrediting bodies have changed their measurement emphasis from inputs and activities to outcomes...Students want not just high-paying jobs, but an acceptable ratio of starting salary to student debt. Governments likewise care not just about the number of graduates but the total cost of producing each graduate.” [17] These questions warrant consideration in the future conversations about the Federal Student Loan Program.
Federal Student Aid (FSA), an office of the U.S. Department of Education, is the largest provider of student financial aid in the United States. Federal Student Aid provides student financial assistance in the form of grants, loans, and work-study funds. Federal Student Aid is also responsible for the development, distribution and processing of the Free Application for Federal Student Aid (FAFSA), the fundamental qualifying form used for all federal student aid distribution programs, as well as for many state, regional, and private student aid programs. Each year Federal Student Aid's staff processes approximately 22 million FAFSAs. Additionally, Federal Student Aid is responsible for enforcing the financial aid rules and regulations required by the Higher Education Act and the U.S. Department of Education and managing the outstanding federal student loan portfolio.
Mission
Federal Student Aid's core mission is to ensure that all eligible Americans benefit from federal financial assistance—grants, loans and work-study programs—for education beyond high school. The programs Federal Student Aid administers comprise the nation's largest source of student financial aid: during the 2010-11 school year alone, Federal Student Aid provided approximately $144 billion in new aid to nearly 15 million postsecondary students and their families. A staff of 1,200 is based in 10 cities in addition to the Washington, D.C. headquarters.
While overseeing $864 billion in outstanding student loans, Federal Student Aid ensures that all partners in the student aid community—schools, servicers and guaranty agencies—operate fairly, honestly and efficiently. Another key role the organization performs is ensuring students and their families are aware that financial aid is available and is an important first step to education beyond high school. Federal Student Aid distributes numerous publications both in print and online and runs several customer call centers. Most of these services are provided in Spanish as well.
The Federal Student Aid team is committed to making education beyond high school more attainable for all Americans, regardless of socioeconomic status.
Student Aid
Federal Student Aid provides financial assistance to students enrolled in eligible programs at participating postsecondary schools (accredited four-year or two-year public or private educational institutions, career schools or trade schools) to cover the cost of education expenses, including tuition and fees, room and board, books and supplies, and transportation. Most federal aid is need-based. The three most common types of aid are grants, loans, and work-study funds.
Grants are a type of financial aid that does not have to be repaid. Generally, grants are for undergraduate students and the grant amount is based on need, cost of attendance, and enrollment status.
Federal Pell Grants are designed for low- and middle-income undergraduate students. Pell Grants for the 2011-2012 school year range from $555 to $5,550.
The Iraq & Afghanistan Service Grant is awarded to students who are ineligible for a Pell Grant only because of the program’s need requirements and whose parent or guardian died as a result of military service in Iraq or Afghanistan after September 11, 2001. The maximum award is $5,500 for the 2011-2012 school year.
The Teacher Education Assistance for College and Higher Education (TEACH) Grant is awarded to undergraduate, postbaccalaureate, or graduate students who are taking coursework necessary to become elementary or secondary teachers. Recipients of this grant must agree to serve as a full-time teacher in a high-need field in a public or private elementary or secondary school that serves low-income students for at least four academic years. The maximum award is $4000 for the 2011-2012 academic year.
Loans are borrowed money that must be repaid with interest. Both undergraduate and graduate students may borrow money. Parents may also borrow to pay education expenses for dependent undergraduate students.
Federal Stafford Loans are made to students and PLUS Loans are made to parents through the William D. Ford Federal Direct Loan (Direct Loan) Program: Eligible students and parents borrow directly from the federal government at participating schools. Direct Loans include Direct Stafford Loans, Direct PLUS Loans, and Direct Consolidation Loans.
The Federal Family Education Loan (FFEL) Program: Until July 1, 2010, a large percentage of federal loans were made through private lenders with federally guaranteed funds. FFEL loans included FFEL Stafford Loans, FFEL PLUS Loans, and FFEL Consolidation Loans. The FFEL Program ended on July 1, 2010 under provisions of the Health Care and Education Reconciliation Act of 2010. All new Stafford, PLUS, and consolidation loans are now administered through the Direct Loan Program.
Campus-Based Aid includes types of aid that schools are responsible for administering on behalf of the federal government.
Federal Perkins Loans are low-interest loans made through a school’s financial aid office using federal funds. Undergraduate and graduate students with exceptional financial need are eligible to receive a Federal Perkins Loan.
The Federal Supplemental Educational Opportunity Grant (FSEOG) is a program through which Federal Student Aid provides funds to schools, who in turn offer the grant to students. FSEOG grants range from $100 to $4,000 during the 2011-2012 school year.
The Federal Work-Study program provides part-time jobs for undergraduate and graduate students with financial need, allowing them to earn money to help pay education expenses.
Following the passage of the Health Care and Education Reconciliation Act of 2010, the Federal Direct Loan Program is the sole government-backed loan program in the United States. Guaranteed loans—loans originated and funded by private lenders but guaranteed by the government—were eliminated because of a perception that they benefited private student loan companies at the expense of taxpayers, but did not help reduce costs for students.
In 2011, the U.S. Department of Education transferred a large number of loans to the private conglomerate: Nelnet. Nelnet appears to be one of the sources of the many problems experienced in October 2011 with hosted website for a new platform for online servicing of federal student loans formerly handled by the government.
Political history
Congress passed a pilot version of the Direct Loan program as part of the Reauthorization of the Higher Education Act under President George H. W. Bush, Bush Signed it into law on July 23, 1992. Under President Bill Clinton the Omnibus Reconciliation Act of 1993 set up a phase in of direct lending. Many schools volunteered for the program, but the 104th Congress passed legislation to prevent the switch to 100% direct lending in 1994.[5] Funding for the Federal Direct Student Loan Program decreased from just over $7 billion in 2006 to $509 million budgeted for 2008.
Under the Obama Administration's new budget, all new loan originations will be under the Direct Loan program by July 2010, netting $6B in annual savings. The bill approving the measure passed the House of Representatives on September 17, 2009.[7] The switch to 100% Direct Lending effective July 1, 2010 was enacted by the Health Care and Education Reconciliation Act of 2010.
In comparison, other countries have also experimented with government-sponsored loan programs. New Zealand, for instance, now offers 0% interest loans to students who live in New Zealand for 183 or more consecutive days[8] (retroactive for all former students who had government loans), who can repay their loans based on their income after they graduate.[9] This program was a Labour Party promise in the 2005 general election.[citation needed]
Current Program Size
The Federal Student Aid (FSA) loan portfolio balances were $896 billion at the end of 2012.[10] The FSA managed $473 billion under the Federal Direct Student Loan Program at the end of 2012.[11] New loans originated under the program during 2012 totaled $106.7 billion.[12] Loan portfolio balances managed by the FSA for the Federal Family Education Loan Program are steady and slowly shrinking as new loans offered to students by the U.S. Department of Education originate under the FDSL program..[13] Most of the growth in FDSL loan portfolio balances can be attributed to new loan originations, while being the sole government program for student loans. Another contributor to the rapid escalation in loan balances is due to the cost of higher education increasing rapidly, faster than inflation. Students are spending and borrowing more to finance their higher-priced, higher education.
Possible Problems in the Future
Some believe that the growth of student loan debt is reaching problematic levels. Economists point to a drag on the economy as a whole because of high levels of student debt.[15] One way that has been suggested to help students with loan repayment is to lower interest on balances. U.S. Senator Richard Blumenthal urged,"We must reduce the student loan interest rate back to 3.4 percent immediately, and then even lower, and develop ways for past students to reduce and erase the $1 trillion in existing debt. The failure of Congress to act now threatens our all too slow and fragile economic recovery and job creation."[16] Another way to deal with debt to income levels is to require higher learning accountability. "Only recently have government regulators demanded accountability for the educational benefits universities produce and the efficiency with which they produce them: What does college cost? How many students are admitted? How many graduate? How long does it take them to graduate? How many get good jobs? At the same time, accrediting bodies have changed their measurement emphasis from inputs and activities to outcomes...Students want not just high-paying jobs, but an acceptable ratio of starting salary to student debt. Governments likewise care not just about the number of graduates but the total cost of producing each graduate.” [17] These questions warrant consideration in the future conversations about the Federal Student Loan Program.
Federal Student Aid (FSA), an office of the U.S. Department of Education, is the largest provider of student financial aid in the United States. Federal Student Aid provides student financial assistance in the form of grants, loans, and work-study funds. Federal Student Aid is also responsible for the development, distribution and processing of the Free Application for Federal Student Aid (FAFSA), the fundamental qualifying form used for all federal student aid distribution programs, as well as for many state, regional, and private student aid programs. Each year Federal Student Aid's staff processes approximately 22 million FAFSAs. Additionally, Federal Student Aid is responsible for enforcing the financial aid rules and regulations required by the Higher Education Act and the U.S. Department of Education and managing the outstanding federal student loan portfolio.
Mission
Federal Student Aid's core mission is to ensure that all eligible Americans benefit from federal financial assistance—grants, loans and work-study programs—for education beyond high school. The programs Federal Student Aid administers comprise the nation's largest source of student financial aid: during the 2010-11 school year alone, Federal Student Aid provided approximately $144 billion in new aid to nearly 15 million postsecondary students and their families. A staff of 1,200 is based in 10 cities in addition to the Washington, D.C. headquarters.
While overseeing $864 billion in outstanding student loans, Federal Student Aid ensures that all partners in the student aid community—schools, servicers and guaranty agencies—operate fairly, honestly and efficiently. Another key role the organization performs is ensuring students and their families are aware that financial aid is available and is an important first step to education beyond high school. Federal Student Aid distributes numerous publications both in print and online and runs several customer call centers. Most of these services are provided in Spanish as well.
The Federal Student Aid team is committed to making education beyond high school more attainable for all Americans, regardless of socioeconomic status.
Student Aid
Federal Student Aid provides financial assistance to students enrolled in eligible programs at participating postsecondary schools (accredited four-year or two-year public or private educational institutions, career schools or trade schools) to cover the cost of education expenses, including tuition and fees, room and board, books and supplies, and transportation. Most federal aid is need-based. The three most common types of aid are grants, loans, and work-study funds.
Grants are a type of financial aid that does not have to be repaid. Generally, grants are for undergraduate students and the grant amount is based on need, cost of attendance, and enrollment status.
Federal Pell Grants are designed for low- and middle-income undergraduate students. Pell Grants for the 2011-2012 school year range from $555 to $5,550.
The Iraq & Afghanistan Service Grant is awarded to students who are ineligible for a Pell Grant only because of the program’s need requirements and whose parent or guardian died as a result of military service in Iraq or Afghanistan after September 11, 2001. The maximum award is $5,500 for the 2011-2012 school year.
The Teacher Education Assistance for College and Higher Education (TEACH) Grant is awarded to undergraduate, postbaccalaureate, or graduate students who are taking coursework necessary to become elementary or secondary teachers. Recipients of this grant must agree to serve as a full-time teacher in a high-need field in a public or private elementary or secondary school that serves low-income students for at least four academic years. The maximum award is $4000 for the 2011-2012 academic year.
Loans are borrowed money that must be repaid with interest. Both undergraduate and graduate students may borrow money. Parents may also borrow to pay education expenses for dependent undergraduate students.
Federal Stafford Loans are made to students and PLUS Loans are made to parents through the William D. Ford Federal Direct Loan (Direct Loan) Program: Eligible students and parents borrow directly from the federal government at participating schools. Direct Loans include Direct Stafford Loans, Direct PLUS Loans, and Direct Consolidation Loans.
The Federal Family Education Loan (FFEL) Program: Until July 1, 2010, a large percentage of federal loans were made through private lenders with federally guaranteed funds. FFEL loans included FFEL Stafford Loans, FFEL PLUS Loans, and FFEL Consolidation Loans. The FFEL Program ended on July 1, 2010 under provisions of the Health Care and Education Reconciliation Act of 2010. All new Stafford, PLUS, and consolidation loans are now administered through the Direct Loan Program.
Campus-Based Aid includes types of aid that schools are responsible for administering on behalf of the federal government.
Federal Perkins Loans are low-interest loans made through a school’s financial aid office using federal funds. Undergraduate and graduate students with exceptional financial need are eligible to receive a Federal Perkins Loan.
The Federal Supplemental Educational Opportunity Grant (FSEOG) is a program through which Federal Student Aid provides funds to schools, who in turn offer the grant to students. FSEOG grants range from $100 to $4,000 during the 2011-2012 school year.
The Federal Work-Study program provides part-time jobs for undergraduate and graduate students with financial need, allowing them to earn money to help pay education expenses.
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