FFELP - The Federal Family Education Loan Program

The Federal Family Education Loan Program (FFELP) is a partnership program between private lenders and the Government and incorporates loans such as PLUS Perkins and Stafford. FFELP was initially introduced in 1966 based on an Act of Congress established in the year 1965. Since its introduction till today, more than half a trillion dollars have been provided to students, with other half a billion USD in the past year alone.

A large network of financial institutions, credit unions and independent banks provide funds for PLUS Stafford and other FFELP loan programs. Such lenders prefer funding to the loan programs that are guaranteed by the Federal Government. An estimate of about 5% of the loans is defaulted and in such instances the Private guarantors apply for whole or partial reimbursement of the lost funds to the Federal Government.

Stafford loan is basically either subsidized or unsubsidized with about 90% of directed funds. In case of subsidized loans the interest is not burdened upon to the student who is in school currently or about six months afterward. In case of unsubsidized loans the interest payment is done by the borrower deferring beyond the grace period, the interest is summed up with the principal amount.

Parent Loans for Undergraduate Students (PLUS) is another popular loan program that funds the parents to aid their wards education. About 8 billion USD is supplied every year through this program. Currently PLUS aids graduate and professional education as well. Plus is a very common loan program since the parents could use the funds for the education and pay the monthly installments just as they would do for the education without a loan.

As with all the student loan programs a Free Application for student aid (FAFSA) application form has to be filled out. The application form is available at http://www.fafsa.ed.gov/. The lenders make the decision of approving the loan based on the information filled in the FAFSA application form.

Typically loan officers for such student loans are employed by the educational institutions where the students are admitted. While the student is admitted the financial aid department would approach the student and parents and would advise a suitable package in the basis of Expected Financial Contribution (EFC). On the basis of the income of parents a suitable loan plan is offered both on subsidized or unsubsidized Stafford loans and other loan programs.

On deciding upon the loan package the disbursal of funds are done twice or four times a year based on the semester pattern. Mostly the loan amount towards the fees is paid directly by the lending bank to the college or educational institution and any remaining amount is then provided to the borrower. The loan fees would be usually around 4% since most of the loan programs charge 3% of origination fee and about 1% of insurance fees as per the regulations of Federal Government. It is important to shop around before choosing one.