The FFELP is a Federal Government private lender partnership scheme and umbrella program that includes both Stafford loans, PLUS loans and Perkins loans, setup by an Act of Congress in 1965, it began operation in 1966 and since this time over half a trillion in money has been disbursed with over $50 billion alone in 2006.



Money for Stafford loans, PLUS loans and other FFELP loans are provided through a large national network of credit unions, independent banks and other financial institutions, lenders will feel confident loaning dollars to what otherwise may be high credit risks because the money is in the end guaranteed, at least in theory via the Federal Government, private guarantors could possibly get involved, however in the almost 5% of cases where the loan goes into default, guarantors then apply for funds to cover the loss with the Federal Government for at least a partial reimbursement of any lost money.

Over 90% of the funds are directed by the two types of Stafford loan, unsubsidized & subsidized, in the second circumstance the Federal government pays the interest on the loan accrued whilst the student is in school and for a further six months afterwards, unsubsidized loans requires the borrower to be responsible for any interest, if the interest is deferred as it most often until after the grace period, it is then added to the primary total.

The other major plan, the PLUS (Parent Loans for Undergraduate Students) loan plan, supplies over $8 billion per calendar year in money to parents and as of July 1, 2006 professional and graduate students are also eligible for PLUS loans, providing dollars to parents to assist cover expenses they would frequently pay for anyway, the PLUS program commonly forms part of the total financial aid package today.

Chiefly, all the services need a FAFSA (Free Application for Student Aid) application to be filled out, the data provided forms the core information that allows loan officers to make their funding decision, typically those decision makers are employed through the individual college at which the student is accepted, the financial aid department will make a suggestion for a package based in part on the EFC (Expected Financial Contribution) of the student and his or her parent(s), analyzing income they aim to supplement any unmet need with combinations of subsidized and unsubsidized Stafford loans and other sources.

Once the student and/or parent accepts the package the money is disbursed, in the main twice per year once each semester, ordinarily with the biggest share of the funds going directly from the private lender to the school to pay for tuition and the remainder is then provided to the student or parent, minus any charges, these fees may range up to 4% or more, several schemes will charge a 3% origination fee and a 1% insurance fee, which they assign to the requirements of the Federal government with fees as high as 8% not being unknown, it's important to keep this information in mind when looking at any student loan consolidation information.