Federal Family Education Loan Program

Federal Family Education Loan Program
Name	Federal Family Education Loan Program
Established	1965
Dissolved	2010
Jurisdiction	United States Department of Education
Type	Student loan program
Successor	William D. Ford Federal Direct Loan Program

Federal Family Education Loan Program

The Federal Family Education Loan Program provided federally guaranteed student loans issued by private lenders to help finance undergraduate and graduate studies at colleges and universities such as Harvard University, Stanford University, University of California, Berkeley, Massachusetts Institute of Technology, and University of Oxford for eligible borrowers. It operated within the context of major legislative acts including the Higher Education Act of 1965 and amendments associated with the administrations of presidents such as Lyndon B. Johnson, Richard Nixon, Jimmy Carter, Ronald Reagan, Bill Clinton, George W. Bush, and Barack Obama; lenders included Bank of America, Wells Fargo, Citigroup, JPMorgan Chase, and regional banks. The program interacted with institutions and agencies like the U.S. Department of Education, the Federal Reserve System, the Consumer Financial Protection Bureau, and private guaranty agencies including the New Jersey Higher Education Student Assistance Authority and the Texas Higher Education Coordinating Board.

Overview

The program functioned as a partnership among private lenders including Citibank, Wells Fargo Bank, Bank of America, PNC Financial Services, SunTrust Banks; guaranty agencies such as the California Student Aid Commission and the Ohio Student Aid Commission; postsecondary institutions including Columbia University, Yale University, Princeton University, University of Michigan, and University of Texas at Austin; and federal oversight entities like the U.S. Department of Education, Congressional Budget Office, Government Accountability Office, Office of Management and Budget, and the White House Office of Management and Budget. It coexisted with other federal initiatives such as the Pell Grant program and tax provisions involving the Internal Revenue Service.

History and Legislative Background

Origins trace to legislative milestones including the Higher Education Act of 1965, the Education Amendments of 1972, the Student Loan Marketing Association (Sallie Mae) Act influences, the Omnibus Budget Reconciliation Act of 1993, and the Higher Education Amendments of 1998. Major congressional committees like the House Committee on Education and Labor, the Senate Committee on Health, Education, Labor, and Pensions, and appropriations panels shaped policy alongside administrations from Lyndon B. Johnson through Barack Obama. Important events impacting the program involved financial crises such as the Savings and Loan crisis, the 2007–2008 financial crisis, and regulatory responses from institutions like the Federal Deposit Insurance Corporation and the Securities and Exchange Commission.

Program Structure and Loan Types

The program featured loan categories such as Federal Stafford Loans, Federal PLUS Loans, and consolidation loans administered by lenders including Bank of America, KeyBank, Capital One, Discover Financial Services, and guarantors such as the New York State Higher Education Services Corporation and the Georgia Student Finance Commission. Participating postsecondary institutions like Boston University, University of Florida, University of Illinois Urbana-Champaign, Ohio State University, and Arizona State University certified student eligibility. Program administration required coordination with entities such as the National Student Loan Data System, the White House Domestic Policy Council, and state authorities like the California Student Aid Commission.

Eligibility and Application Process

Eligibility rules referenced statutes and forms processed by schools such as University of North Carolina at Chapel Hill, University of Washington, Michigan State University, Pennsylvania State University, and University of Wisconsin–Madison; applications often involved the Free Application for Federal Student Aid and coordination with financial aid offices, congressional offices, the Department of Veterans Affairs for veterans' benefits holders, and tax records filed with the Internal Revenue Service. Borrowers included students attending institutions accredited by agencies like the Middle States Commission on Higher Education, the Southern Association of Colleges and Schools, the Western Association of Schools and Colleges, and professional schools such as Harvard Law School and Johns Hopkins University School of Medicine.

Subsidies, Interest Rates, and Repayment Terms

Interest rate policy and subsidy rules intersected with fiscal oversight by the Congressional Budget Office and the Government Accountability Office, and affected lenders like JPMorgan Chase, Wells Fargo, Citigroup, and Goldman Sachs through the secondary market, including Sallie Mae and investors such as BlackRock and Vanguard Group. Repayment plans mirrored programs used at institutions like University of Southern California, Northwestern University, University of Pennsylvania, Duke University, and Rice University and included deferment and forbearance options managed in coordination with guaranty agencies and loan servicers such as Navient and AES/PHEAA.

Transition, Phase-Out, and Successor Programs

Congressional action during the presidencies of George W. Bush and Barack Obama led to the phase-out and transition to the William D. Ford Federal Direct Loan Program administered by the U.S. Department of Education, affecting lenders including Wells Fargo and Bank of America and guaranty agencies like the Texas Higher Education Coordinating Board. The transition influenced markets served by Sallie Mae and mortgage and loan investors such as Goldman Sachs and Morgan Stanley.

Criticisms and Impact on Higher Education Financing

Critiques involved reports from the Government Accountability Office, testimonies before the House Committee on Education and Labor, analysis by the Brookings Institution, the Heritage Foundation, and the Center on Budget and Policy Priorities; academic studies from scholars at Harvard University, Princeton University, Stanford University, University of Chicago, and Columbia University examined effects on tuition at private institutions like Amherst College and public systems such as the California State University and City University of New York. Issues addressed included lender incentives, taxpayer exposure, effects on borrowers attending Community College of Philadelphia, Miami Dade College, and for-profit colleges such as the former ITT Technical Institute, with policy responses debated in forums including the Brookings Institution, hearings in the United States Senate, and analyses by the Urban Institute.

Category:Student loans