Loan Help from FFELP: Fifty Years of Student Loans

By John L. Fischer, Personal Finance Writer   

FFELP student loans

Way back in 1965, Congress began guaranteeing student loans, creating the Federal Family Education Loan Program (FFELP). It was designed to give both public and private college loan assistance.

Several years earlier, the "Space Race" — history's name for competition in space travel between the U.S. and the U.S.S.R. — helped launch the initial idea for student loans. (Government officials decided that more money was needed to train qualified people for space exploration.)

In fact, in 1958, the National Defense Education Act established the first federal student loan program.1

Now, some fifty years later, millions of student dreamers continue to receive needed monetary boosts.

How FFELP helps student loans today; college loan options at a glance

Here's a brief overview of how FFELP can help you with both federal and private student loans:

Federal student loans

There are four main types of federal student loans:

  1. Subsidized Stafford Loans. These are paid directly to the student. You don't need to start paying back these loans until six months after graduation.
  2. Unsubsidized Stafford Loans. These are geared for parents and legal guardians only; if you're a student, you can't apply for one directly. You must start paying these loans back immediately — right after approval.
  3. Federal PLUS Loans. These are also paid to parents or guardians of dependent students. Students can't apply directly, and your parent or guardian must undergo a credit check to qualify.
    Federal PLUS loans are a good example of student loan consolidation options: If, for example, it costs $5,000 to attend your school, and you already receive $4,000 in other student financial aid, a cap of $1,000 will be placed on the loan.
  4. Federal Perkins Loans. No one can apply for this type of loan; instead, you have to qualify. To learn more, contact your school's Office of Student Financial Aid.

Private student loans

Most private student loans carry at least a 10% interest rate; federal student loans are typically less than half that. So before you look into private loan options, make sure you consider all federal loan options first.

Footnotes
1 "History of Federal Family Education Loans and Direct Student Loans," New America Foundation