Federal Student Loan Program - What Is It?

Why is the us government involved in funding education? The answer is simple - it has to or an incredible number of Americans would not go to college as the 'debt burden' would be too great to cope with!

A survey taken in 2004 revealed that 92% experienced that federal financial assistance provided to low and middle income students and their own families through the federal student loan program is now more important than it was a couple of years ago. Furthermore student debts are on average greater compared to $30, 000!

The amount of outstanding debt that you are able to accrue is up to $23, 000 so for the average student there's a shortfall in funding - but at least this assistance represents about 75% from the total debt. This is especially true for graduate and medical expert students. More often than not students also have part-time vacation work (at least I did! ) to offset the expense but this can and does, in many cases, harm academic results and for that reason employability in an ever increasingly competitive work environment!

Just how does it work?

To examine how it works is to check out the circumstances that would lead a student to utilize. Students tend to accumulate debt over time and most lending companies are pleased to lend for two reasons. Firstly to gain a customer and secondly to create money - no surprises here. However students from low income families find that as each loan accumulates on another the interest rate charge can increase. In this situation a 'consolidation' is generally considered i. e. the debts are merged into just one debt with a single payment.

There are two techniques:

1. By going to private lenders such as banking institutions directly or,

2. By Applying for a federal mortgage program.

The Private Sector

In some ways the private sector has adopted a few of the mechanisms of the federal government. In April 2006 the actual Nations leading provider of education funding, Sallie Mae, introduced a brand new Private Consolidation Loan allowing holders of private education loans from any lender to mix 'eligible' loans into one loan with a single payment. --either from Sallie Mae or another lender--to manage repayment by combining their eligible loans right into a new loan with a single monthly payment, a potentially lower payment amount and an extended repayment term.

The Federal Government authorities Role

The loan consolidation program is available to college students currently in college or for graduates. The Government has setup the Federal Family Education Loan Program (FFELP) which provides a low interest rate (usually substantially lower) consolidation for students from low earnings families. The Federal Direct Subsidized Loan is need-based. The benefits to the student include some tax deductability but one of many benefits is the ability to pay back only the eye whilst the student is still at college and full payment of interest and principal doesn't start until the graduate has had a job for 6 months.

If the applicant fails to get a subsidized mortgage, usually a Stafford loan there is still the option of getting an unsubsidized Stafford Loan - the main difference being only within the interest payment and grace period subsidy.


The federal student loan program is dynamic and competitive. It provides the opportunity to millions of American students to access an education that they would not otherwise have. The resources of the Government and large lending businesses like Sallie Mae ensure that rates and options available are continue being accessible to those most in need.