Stafford Loan Lenders
The Stafford Loan is administered through the Department of Education, which is a federal government agency. The Direct Loan Program is part of the Department of Education that oversees all aspects of the Stafford Loan Program. Having student loans through the federal government offers students the opportunity to receive a quality education by borrowing a low interest student loan with favorable repayment terms.
Prior to 2010, students had the opportunity to receive a Stafford Loan through a private financial institution. This program was known as the FFEL (Federal Family Education Loan) program and allowed private banks to partner with other government agencies to lend student loans. In the programís last year in existence, it served 6.5 Million students and parents and lent a total of $54.7 billion in new loans. This accounted for 80% of all new federal student loans.
Following the passage of the Health Care and Education Reconciliation Act of 2010 on March 26, 2010 the program was eliminated, and no subsequent loans were permitted to be made under the program after June 30, 2010.
In the FFEL Program, private lenders made federally guaranteed student loans to parents and students. The government would guarantee a large portion of these loans, insuring private lenders against any type of default. If a parent or student defaults, the private lender was reimbursed by the government for its losses.
Now that the FFEL program no longer exists, the Direct Loan program lends directly to students using federal funds provided by the US Treasury. This has saved the federal government billions of dollars annually, since there are no administrative or default fees that are due to the financial institution. The Direct Loan Program now controls all administrative and financial aspects of the Stafford Loan process.
Students interested in receiving a Stafford Loan must complete the FAFSA (Free Application for Federal Student Aid), which is also administered through the Direct Loan program.