Congressional Research Service Provides Comprehensive Overview of Federal Student Loans

A recent report by the Congressional Research Service discusses major provisions of federal student loans made through the Direct Loan program and previously made through the FFEL program. The report focuses on provisions related to borrower eligibility, loan terms and conditions, borrower repayment relief, and loan default and its consequences for borrowers.

The U.S. Department of Education estimates that 25.1 million new Stafford Loans and PLUS Loans, averaging $4,948 each and totaling $124.3 billion, will be made to students and parents in fiscal year (FY) 2012. It also estimates that that 609,000 Consolidation loans, averaging $37,323 and totaling $22.7 billion, will also be made.

In recent years, numerous changes have been made to the terms and conditions of FFEL and DL program loans. Most recently, the Budget Control Act of 2011 (P.L. 112-25) eliminated the availability of Subsidized Stafford Loans to graduate and professional students on or after July 1, 2012 and the availability of certain repayment incentives for loans made on or after July 1, 2012. The Consolidated Appropriations Act, FY2012 (P.L. 112-74) eliminated interest subsidies during the six-month post-enrollment grace period on Subsidized Stafford Loans disbursed to undergraduate students between July 1, 2012, and June 30, 2014.

This report describes currently effective provisions of the FFEL and DL programs and reflects amendments that have been enacted through January 2012, including those made under the College Cost Reduction and Access Act (CCRAA; P.L. 110-84), the Ensuring Continued Access to Student Loans Act (ECASLA; P.L. 110-227), the Higher Education Opportunity Act (HEOA; P.L. 110-315), the 2009 technical corrections to the HEA (P.L. 111-39), the Patient Protection and Affordable Care Act (P.L. 111-148), the SAFRA Act, part of the Health Care and Education Reconciliation Act of 2010 (HCERA; P.L. 111-152), the Budget Control Act of 2011 (BCA; P.L. 112-25),10 and the Consolidated Appropriations Act, FY2012 (P.L. 112-74).

Historical information on certain prior terms and conditions is presented in instances where there remains substantial interest in those aspects of loans. Following a brief review of loan types in the introduction, the report reviews eligibility requirements, loan limits, interest rates, and allowable fees for these loans. This is followed by a comparable section on Consolidation Loans. The remainder of the report examines various terms and conditions of FFEL and DL program loans that are applicable to all loan types. These include student loan discounts and incentives, loan repayment, repayment relief, loan default, loan rehabilitation, loan discharge, and loan forgiveness. A glossary of selected financial terms is also included.