Federal Family Education Loans
FEDERAL STUDENT AID, DEPARTMENT OF EDUCATION
Higher Education Act of 1965, Title IV, Part B, as amended.
To encourage lenders such as banks, credit unions, savings and loan associations, pension funds, insurance companies, and schools to make loans to vocational, undergraduate, and graduate students enrolled at eligible postsecondary institutions to help pay for educational expenses. The loans are insured by a State or private nonprofit guaranty agency and reinsured by the Federal government.
Types of Assistance
Uses and Use Restrictions
To help defray costs of education at a participating school. Repayment on Federal Stafford Loans begins six months after the student ceases to carry at least one-half the normal full-time academic workload. Repayment of principal and interest on PLUS Loans generally begins within 60 days of disbursement of the last installment, repayment of a consolidation loan begins within 60 days after the proceeds of the loan have been used to discharge the liability of the borrower on the loans selected for consolidation. Deferments and forbearance of payment may be granted for certain authorized periods.
Under the Federal Stafford Loan Program, any U.S. citizen, national, or person in the United States for other than a temporary purpose, who is enrolled or accepted for enrollment in a degree or certificate program on at least a half-time basis as an undergraduate, graduate, or professional student at a participating postsecondary school may apply. An otherwise eligible student is eligible for loans during a single 12-month period in which the student is enrolled in a non-degree/non-certificate course of study that the school has determined is necessary in order for the student to enroll in a program leading to a degree or certificate. Under the Federal PLUS Loan program, parents may borrow for dependent students, and beginning July 1, 2006, graduate students may borrow to support their own education. Under the Federal Unsubsidized Stafford Loan program, graduate or professional students, and independent undergraduate students may apply; under certain circumstances, a dependent undergraduate student may apply for an Federal Unsubsidized Stafford Loan. Students who are enrolled at an eligible institution on at least a half time basis in a program that is required by a State for elementary or secondary teacher certification are also eligible for Federal Family Education Loan Program (FFEL) aid (Stafford, Unsubsidized Stafford and PLUS). Under the Federal Consolidation Loan program, a borrower may have his or her Stafford, Unsubsidized Stafford, PLUS, Perkins (formerly NDSL), and Health Professions Student loans consolidated, provided that the borrower is in a grace period or repayment status on all loans being consolidated, or is a delinquent or defaulted borrower who will reenter repayment through consolidation, and does not have another application for a consolidation loan pending. Only U.S., citizens or nationals may receive a loan to attend eligible foreign postsecondary schools. A student presently enrolled at a participating institution must maintain satisfactory academic progress in the course of study he/she is pursuing. Also, the borrower may not owe a refund on any Title IV grant or be in default on any Title IV loan received for attendance at any school. The borrower must also file a statement of registration compliance (Selective Service). To receive a subsidized Stafford Loan, all borrowers must undergo a financial need analysis to determine eligibility for Federal interest and special allowance benefits. Unsubsidized Federal Stafford, PLUS, or Consolidation loans are non-need based programs. A Stafford Loan applicant who is an undergraduate student who attends a school that participates in the Pell Grant program must receive a determination of his or her Pell Grant eligibility or ineligibility before the school may certify an application for a loan. If the applicant is determined to be eligible for a Pell Grant, the applicant must apply for a Pell Grant for the enrollment period before the institution may certify an application for a FFEL loan. An Unsubsidized Stafford Loan applicant must also receive a determination of need for a loan under the Stafford Loan program and, if eligible, must apply for a Stafford Loan prior to the school's certification of the Unsubsidized Stafford Loan application.
Generally, for the Federal Stafford Loan, Unsubsidized Stafford Loan, and PLUS Loan programs, any U.S. citizen, national, or person in the United States for other than a temporary purpose, who is enrolled or accepted for enrollment in a degree or certificate program on at least a half-time basis as an undergraduate, graduate, professional, or vocational student at a participating postsecondary school benefits. If a student is enrolled in a non-degree/noncertificate course of study, the student may be eligible for Stafford or Unsubsidized Stafford loans for one consecutive twelve-month period, if the school determines that the course of study is necessary in order for the student to enroll in a program leading to a degree or certificate. A student enrolled on at least a half-time basis in a program required by a State for a professional credential or certificate for employment as a teacher in an elementary or secondary school located in that State is eligible to receive aid under the Stafford Loan, Unsubsidized Stafford Loan, and PLUS Loan programs. Consolidation Loan borrowers need not be enrolled in any school to be eligible.
For the Federal Stafford Loan, Unsubsidized Stafford Loan, and PLUS Loan programs, the student will need certification of eligibility from the school, and may be required to supply documentation to verify the accuracy of data used in the Stafford Loan need analysis. This program is excluded from coverage under OMB Circular No. A-87.
Application and Award Process
Information regarding application procedures may be obtained from lenders, schools, the Department of Education, States, or guaranty agencies. This program is excluded from coverage under OMB Circular No. A-102. This program is excluded from coverage under E.O. 12372.
Applications for the Federal Stafford Loan, Unsubsidized Stafford Loan, and PLUS Loan programs are obtained from a participating lender, guaranty agency, or school. Consolidation Loan applications are obtained from lenders. The borrower completes his or her portion of a Stafford, Unsubsidized Stafford, or PLUS loan application and submits it to the school. The school must certify the student meets eligibility requirements for the loan, including a certification that the student is enrolled, or accepted for enrollment as at least a half-time student, and that the student is making satisfactory progress. The school must also certify the type and amount of loan the student is eligible to receive. The lender then completes its portion of the application and forwards it to the guarantor for commitment. In some States, the guarantor issues the notice of guarantee prior to sending the application to the lender. This program is excluded from coverage under OMB Circular No. A-110.
If the lender agrees to make the loan, the application is forwarded to the guarantor for insurance. The lender disburses the proceeds of a Stafford, Unsubsidized Stafford, or PLUS loan to the school or, if the student is attending a foreign school, directly to the borrower. Consolidation Loan proceeds are disbursed directly to the holders of the loans selected for consolidation. In most cases, a loan must be disbursed in more than one installment over the length of the period of enrollment for which the loan was intended, based on a disbursement schedule provided to the lender by the school on behalf of the borrower. This multiple disbursement requirement does not apply to Consolidation Loans. The borrower is required to pay an insurance premium of one percent of the principal amount of a subsidized Stafford Loan, Unsubsidized Stafford Loan, or PLUS Loan. The charging of the insurance premium and the amount is determined by the guarantor. In addition, for a Stafford, Unsubsidized Stafford, or PLUS loan, the borrower is required to pay a three percent "origination fee" (on loans disbursed on or after July 1, 1994) which is used to help defray program costs. All of these fees are normally deducted proportionately from each disbursement of the loan proceeds. Under the Higher Education Reconciliation Act, these fees would be reduced to 2 percent on July 1, 2006; 1.5 percent on July 1, 2007; 1 percent on July 1, 2008; and 0.5 percent on July 1, 2009. The fees would be eliminated as of July 1, 2010.
Range of Approval/Disapproval Time
Formula and Matching Requirements
Length and Time Phasing of Assistance
Applicants may apply for a loan for any year of school. The College Cost Reduction and access Act (CCRAA) of 2007 authorized phased reductions to the interest rates for Subsidized Stafford loans borrowed by undergraduates with the rate cut in half to 3.4 percent on July 1, 2011. Repayment generally is made over a period of 10 years for Federal Stafford, and PLUS Loans, excluding periods of authorized deferment and forbearance, but extended repayment plans are available. The repayment period for a Consolidation Loan depends on the amount of the loan and may be up to 30 years, exclusive of periods of authorized deferment and forbearance. CCRAA created a new income-based repayment plan for those borrowers meting a standard of "partial financial hardship" based on their annual repayment amount in relation to their adjusted gross income. Generally a borrower would not have to repay on a monthly basis more than 15 percent of their discretionary income. Any outstanding balance would be forgiven after 25 years of repayment in the income-based repayment option.
Post Assistance Requirements
Lenders submit quarterly reports of loans outstanding in order to receive interest benefits and special allowance payments. Guaranty agencies submit reports in order to receive reinsurance and administrative payments. Additional operational reports are required for specific purposes.
Lenders, schools (except foreign schools), and guaranty agencies are subject to examination and program review by the Department of Education. Generally, program reviews are performed on a fiscal year basis. Participating schools must have an independent audit of all Stafford Loan Program transactions at least annually. Guaranty agencies must have independent financial and compliance audits annually. Guaranty agencies must conduct annual reviews of the ten largest loan volume lenders in their areas as well as schools with default rates above 20 percent that do not have a default management plan approved by the Secretary.
Lenders must maintain records to support and identify loan transactions, interest billings, and/or special allowance. Guaranty agencies must maintain complete records to support and identify their activities. Federal regulations specify administrative and fiscal records required to be maintained by schools.
Aid available (Loan volume net of consolidations) FY 07 $51,320,000,000; FY 08 est $56,242,000,000; and FY 09 est $59,308,000,000. FFEL Consolidation volume: FY 07 $46,941,000,000; FY 08 est $33,940,000,000; and FY 09 est $38,863,000,000.
Range and Average of Financial Assistance
Varies depending on the type of loan.
Over 13.1 million loans were made in fiscal year 2007.
Regulations, Guidelines and Literature
34 CFR 682.
Regional or Local Office
See list of Regional Offices listed in Appendix IV of the Catalog. Each State with an operating guaranty agency maintains an office in its respective State. A list of guaranty agency addresses is available from the address below.
Office of Postsecondary Education, Department of Education, Washington, DC 20202. Telephone: (800) 433-3243.
Web Site Address
64.117, Survivors And Dependents Educational Assistance
84.007, Federal Supplemental Educational Opportunity Grants
84.033, Federal Work-Study Program
84.038, Federal Perkins Loan Program-Federal Capital Contributions
84.042, Trio-Student Support Services
84.044, Trio-Talent Search
84.047, Trio-Upward Bound
84.063, Federal Pell Grant Program
84.066, Trio-Educational Opportunity Centers
84.069, Leveraging Educational Assistance Partnership
Examples of Funded Projects
Criteria for Selecting Proposals