Over $ 50 billion in student loan funds were paid out in 2006 under the Federal Family Education Loan program. States in 1966 this program is the basis for student loan programs such as the Perkins loan, the Stafford loan and PLUS. This program was started by an Act of Congress and has distributed billions upon billions of dollars to students for their education over the last 40 years.
The government in a sense serves as a guarantor for loans that fall under this program giving lending institutions more security in extending credit to students and parents for college funds. Because of this a large number and various types of lenders are willing to have a share in this loan program.
There are a small percentage of situations where these loans are defaulted on. In these cases a third party will step up and make a request to the federal government to recoup some of the money lost. Though they may not be able to recoup every penny they are usually able to recover a portion of their loss.
Subsidized and unsubsidized loans are the two options that fall under this loan program. The difference between the two is that with an unsubsidized loan the borrower is responsible for all interest accrued on the loan. If they do not begin making payments until six months after graduation all interest that has accrued to that point is added to the original loan amount. In the case of a subsidized loan the government pays all interest on the loan until the borrower begins to make payments 6 months after graduating.
Billions of dollars each year are loaned through the PLUS loan program which enables parents and graduate students to finance the high cost of higher learning. This is an invaluable tool for parents paying for their child's education. Since July of 2006 it is been an invaluable tool for graduate students as well.
You can find a complete application for these loans online at fafsa.ed.gov/. The application you find here (Free Application for Student Aid – or FAFSA) is the application that must be completed for all the different types of student loans available under FFELP.
A total financial aid package will likely include different loan programs. Once it is determined what a student or his family can contribute toward his education a formula of loans can be created to make up the deficit.
The funds from the financial aid package are normally sent directly to the college at the start of each semester as payment of tuition. Any funds left in excess after tuition and fees are paid are disbursed to the student or his parents.
The fees associated with student loans vary. They can be as low 3% or as high as 8%. Around 4 or 5 percent is common. Since there is a variation it is important to do some searching so that you get the least expensive loan available to you.