Federal Family Education Loan Program
The Federal Family Education Loan Program (FFELP) is known to be the largest federal student aid program in the United States for higher education. These are managed through government or private non-profit agencies, and these agencies are known as the ‘guaranty agencies’ where the insurance of the program is handled. Millions of students are using the FFELP program to pay for the educational expenses because of its guaranteed security by the federal government. FFELP differs from Federal Direct Loan Programs (FDLP) in a sense that FDLP are directly provided by the government without the intervention of non-profit agencies.
FFELP how does it work?
Private financial institutions (banks, credit cooperatives and loan and savings companies) lend money to families in co-operation with the federal government, thus offering low interest rates. The cost of such loans are affordable for students and their families, and under certain economic and family circumstances the government even pays for some of the loan's interest while the student is still studying (also called: subsidized loan).
The federal government applies an initial charge of 3%, and the financial institution granting the loan can charge a maximum 1%. Both charges are automatically deducted from the loan. Students therefore receive the granted sum minus these charges.
Every 1st of July the interest rates for student loans are reviewed and will be presented online. The rates are valid for one year.
What types of FFELP exist?
FFELP can take three different forms, respectively:
- Subsidized Loans:
Under certain economic and family circumstances the government pays for some of the loans its interest while the student is still studying. To be eligible for this type of loan you will have to prove that you are in need to obtain this kind of subsidy; need to have applied for a Pell grant beforehand; and you must be either an American citizen or a foreigner with permanent residence permission.
- Unsubsidized Loans:
You pay for the loan its interest while you are studying. You can choose whether or not to defer interest repayment while studying. If interest repayment is deferred, when you finish university you must repay the whole accumulated interest plus the pending capital, according to the conditions agreed when the loan was granted
- Federal Plus Loans:
Your parents can apply for a Federal Plus Loan covering the entire expense (tuition, administrative fees, books and material, accommodation and meals, transportation) for their your first university education. Any other government financial aid will be discounted from the sum granted. This is a federal government-guaranteed loan and it helps parents to cover your studies with a low interest rate. There's no need to prove a situation of economic need, but the university selected may ask you to apply for a federal loan in order to accept the student enrolment admission in the university. Parents need a good credit history and will be checked on unfulfilled repayment of other loans the past.
We strongly advise you to consult your financial aid office at your high school or University to give you all the necessary information you need on choosing the right program that suits your financial needs. When you have already done this you can go to Free application for federal student aid (FAFSA) and apply online for governmental financial aid.
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