Why is the federal Government involved in funding education? The answer is simple - it has to or millions of Americans would not go to college as the 'debt burden' would be too great to deal with!
A survey taken in 2004 revealed that 92% felt that federal financial assistance provided to low and middle income students and their families through the federal program is now more important than it was a few years ago. Furthermore student debts are on average greater than $30,000!
The amount of outstanding debt that you can accrue is up to $23,000 so for the average student there is a shortfall in funding - but at least this assistance represents about 75% of the total debt. This is especially true for graduate and health professional students. More often than not students also have part time vacation work (at least I did!) to offset the costs but this can and does, in many cases, harm academic results and therefore employability in an ever increasingly competitive work environment!
So how does it work?
To examine how it works is to look at the circumstances that would lead a student to apply. Students tend to accumulate debt over time and most lending companies are happy to lend for two reasons. Firstly to gain a customer and secondly to make money - no surprises here. However students from lower income families find that as each loan accumulates on the other the interest rate charge can increase. In this situation a 'consolidation' is usually considered i.e. the debts are merged into a single debt with a single payment.
There are two methods:
By going to private lenders such as banks directly or,
By Applying for a federal loan program.
The Private Sector
In some ways the private sector has adopted some of the mechanisms of the federal government. In April 2006 the Nations leading provider of education funding, Sallie Mae, introduced a new Private Consolidation Loan allowing holders of private education loans from any lender to combine 'eligible' loans into one loan with a single monthly payment.-either from Sallie Mae or another lender-to manage repayment by combining their eligible loans into a new loan with a single monthly payment, a potentially lower monthly payment amount and an extended repayment term.
The Federal Governments Role
The loan consolidation program is available to students currently in college or for graduates. The Government has set up the Federal Family Education Loan Program (FFELP) which provides low interest (usually substantially lower) consolidation for students from low income families. The Federal Direct Subsidized Loan is need-based. The benefits to the student include some tax deductability but one of the main benefits is the ability to pay back only the interest whilst the student is still at college and full payment of interest and principal does not start until the graduate has had a job for six months.
If the applicant fails to get a subsidized loan, usually a Stafford loan there is still the option of taking out an unsubsidized Stafford Loan - the main difference being only in the interest payment and grace period subsidy.
The federal student loan program is dynamic and competitive. It provides the opportunity to millions of American students to gain access to an education that they would not otherwise have. The resources of the Government and large lending companies like Sallie Mae ensure that rates and options available are continue to be accessible to those most in need.
Article Title : Federal Student Loan Program - What Is It
At, EdFed, we proudly introduce 'articles on student loans' and 'Learnal - the journal to learn from', our free newsletter on student loan management, which is sure to keep you informed of the latest events and happenings in the student loan market. To receive your copy of the above just use the RSS feed below and add this to your "My Yahoo", blogs, newstickers, and other similar channels accepting distributable content.
Click here to sign up for our Weekly Newswire now!
How EdFed Helped others!
Consolidating my loans with EdFed was the best thing I did this year. Even though I did procrastinate I was able to lock in the lower interest rate and now I am on my way to saving thousands of dollars. Thank you EdFed! - Noah J. Denver, CO
Student Loan Consolidation Info - How to Choose the Right Loan Company
The Career Resources column is presented by Granted, America's leading job search engine dedicated to getting people jobs.
Education is one of the most basic right of any human, but with the increase in prices and the costs involved in education this has made these rights turn into a privilege which very few can enjoy. Any normal person today in the whole of United States has to take an education loan at one point of time to pay for their education fees.