| Why is the federal Government involved in funding | | | | In some ways the private sector has adopted some |
| education? The answer is simple - it has to or millions | | | | of the mechanisms of the federal government. In |
| of Americans would not go to college as the 'debt | | | | April 2006 the Nations leading provider of education |
| burden' would be too great to deal with! | | | | funding, Sallie Mae, introduced a new Private |
| A survey taken in 2004 revealed that 92% felt that | | | | Consolidation Loan allowing holders of private |
| federal financial assistance provided to low and middle | | | | education loans from any lender to combine 'eligible' |
| income students and their families through the federal | | | | loans into one loan with a single monthly |
| program is now more important than it was a few | | | | payment.--either from Sallie Mae or another lender--to |
| years ago. Furthermore student debts are on | | | | manage repayment by combining their eligible loans |
| average greater than $30,000! | | | | into a new loan with a single monthly payment, a |
| The amount of outstanding debt that you can accrue | | | | potentially lower monthly payment amount and an |
| is up to $23,000 so for the average student there is | | | | extended repayment term. |
| a shortfall in funding - but at least this assistance | | | | |
| represents about 75% of the total debt. This is | | | | The Federal Governments Role |
| especially true for graduate and health professional | | | | The loan consolidation program is available to |
| students. More often than not students also have | | | | students currently in college or for graduates. The |
| part time vacation work (at least I did!) to offset the | | | | Government has set up the Federal Family Education |
| costs but this can and does, in many cases, harm | | | | Loan Program (FFELP) which provides low interest |
| academic results and therefore employability in an | | | | (usually substantially lower) consolidation for students |
| ever increasingly competitive work environment! | | | | from low income families. The Federal Direct |
| | | | Subsidized Loan is need-based. The benefits to the |
| So how does it work? | | | | student include some tax deductability but one of the |
| To examine how it works is to look at the | | | | main benefits is the ability to pay back only the |
| circumstances that would lead a student to apply. | | | | interest whilst the student is still at college and full |
| Students tend to accumulate debt over time and | | | | payment of interest and principal does not start until |
| most lending companies are happy to lend for two | | | | the graduate has had a job for six months. |
| reasons. Firstly to gain a customer and secondly to | | | | If the applicant fails to get a subsidized loan, usually a |
| make money - no surprises here. However students | | | | Stafford loan there is still the option of taking out an |
| from lower income families find that as each loan | | | | unsubsidized Stafford Loan - the main difference |
| accumulates on the other the interest rate charge | | | | being only in the interest payment and grace period |
| can increase. In this situation a 'consolidation' is usually | | | | subsidy. |
| considered i.e. the debts are merged into a single | | | | Conclusion |
| debt with a single payment. | | | | The federal student loan program is dynamic and |
| There are two methods: | | | | competitive. It provides the opportunity to millions of |
| 1. By going to private lenders such as banks directly | | | | American students to gain access to an education |
| or, | | | | that they would not otherwise have. The resources |
| 2. By Applying for a federal loan program. | | | | of the Government and large lending companies like |
| | | | Sallie Mae ensure that rates and options available are |
| The Private Sector | | | | continue to be accessible to those most in need. |