What is the Federal Family Education Loan Program?

Going to college nowadays can cost between $100,000 and $200,000 dollars. A large percentage of parents and students have to borrow to finance college. In 2006 students and families borrowed over 78 billion dollars to pay college expenses. In 2008 Al Lord the CEO of Sally Mae likened the student loan business to the proverbial train wreck. People took stock in what he was saying because Sally Mae is the largest student loan company in the country with a student loan portfolio worth 165 billion dollars. His words were pretty accurate because of the losses to the tune of almost 100 million in the first quarter of 2008. The entire student loan business financed through lending institutions totals 325 billion dollars and that does not include the amount of loans made directly by the federal government. Federal and private lender student loans combined are in the neighborhood of half a trillion dollars. That is a whole lot of cash.

Congress reauthorized the Higher Education Act in 2008 and reduced the subsidies the federal government pays college lenders through the Federal Family Education Loan Program (FFELP). The Federal Family Education Loan Program is the private sector student loan program that makes higher education affordable. Lenders who sell their student loans on the secondary market were dealt a second hit when the subprime mortgage crisis shattered the student loan secondary market as well.

One large player in the secondary market, the Education Resource Institute filed for bankruptcy because it could not find investors in the secondary market to buy the secured college loans.

Lenders suspending FFELP Loans include 111 in total. Lenders exiting or suspending private student loans include 34 in total. Lenders suspending or limiting only FFELP consolidation loans include 31 in total. Lenders expanding their loan programs are 11 total as of September 26, 2008.

To learn more about those 11 programs, please see more in the resource box below.

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