There has been a lot of talk about student loans in the news lately, so we thought it might be interesting to share a bit of history about how the federal student loan program started. The first federal student loans were provided under the National Defense Education Act of 1958. These were direct loans funded with U.S. Treasury funds.
Congress wanted to expand on this initial approach, so the government started guaranteeing student loans provided by banks and non-profit lenders in 1965. This was the creation of what is currently called the Federal Family Education Loan (FFEL) program. The guarantee approach was more attractive to the government because it appeared to have no upfront budget costs since the government’s liability for defaults would not occur until years later.
President George H.W. Bush signed the Federal Credit Reform Act in 1990 to address many economists concerns over the government’s guarantees of loans. The change in law required all federal loan programs to account for their long-term expenses and income, which also required the government to set aside the money required to cover the costs of the loan over the life of the loan.
There was an increasing belief that the government’s guarantee of private student loans did not reduce expenses for students and was a significant cost to the taxpayers. In 1992, the government created a pilot program for direct lending. In 1993, the federal government’s guarantee program was replaced by the direct lending approach. In 1994, after much controversy regarding which program was best, Congress passed a law allowing colleges the choice of participating in either the guarantee program or the direct lending program.
Finally, in 2010, the FFEL program for all new loans made as of July 1, 2010, was eliminated. As of that date, all federal student loans have been made under the William D. Ford Federal Direct Loan program, with the U.S. Department of Education as the lender.
Our student loan attorneys are experienced in handling a wide variety of loan issues. Whether you have a small amount or a significant amount of student loan debt, we can help.
Please keep in mind that every matter is different. If you have questions about your student loan debt and you would like to schedule a no-cost consultation to discuss your options, please contact our office by completing the form on this website or calling us at (954) 516-2566.