Federal Student Loans Made Under the Federal Family Education Loan Program and the William D. Ford Federal Direct Loan Program: Terms and Conditions for Borrowers

David P. Smole
Specialist in Education Policy

The William D. Ford Federal Direct Loan (DL) program, authorized under Title IV, Part D of the Higher Education Act of 1965 (HEA), as amended, is the primary federal student loan program administered by the U.S. Department of Education (ED). The program makes available loans to undergraduate and graduate students and the parents of dependent undergraduate students to help them finance their postsecondary education costs. Several types of loans are offered through the DL program: Subsidized Stafford Loans and Unsubsidized Stafford Loans for undergraduate and graduate students; PLUS Loans for graduate students and the parents of dependent undergraduate students; and Consolidation Loans through which borrowers may combine their loans into a single loan. For FY2012, ED estimates that 25.1 million loans (not including Consolidation Loans) totaling $124.3 billion will be made to students and their parents through the DL program.

Until July 1, 2010, Subsidized Stafford Loans, Unsubsidized Stafford Loans, PLUS Loans, and Consolidation Loans were also available through the Federal Family Education Loan (FFEL) program, authorized under Title IV, Part B of the HEA. The SAFRA Act, part of the Health Care and Education Reconciliation Act of 2010 (HCERA; P.L. 111-152), terminated the authority to make new loans under the FFEL program after June 30, 2010. While new loans may no longer be made through the FFEL program, approximately $384 billion in FFEL program loans are outstanding and are due to be repaid over the coming years.

Under the DL program, which has effectively replaced the FFEL program, loans are made with capital provided by the federal government. Under the FFEL program, loans were made with capital provided by private lenders, and the federal government guaranteed lenders against loss through borrower default, death, permanent disability, or, in limited instances, bankruptcy. When both programs were authorized and making available essentially the same types of loans, institutions of higher education (IHEs) were permitted to select the program of their choice.

FFEL and DL program loans are low-interest loans, with maximum interest rates for each type of loan established by statute. Subsidized Stafford Loans are unique in that they are only available to students demonstrating financial need. The Secretary of Education pays the interest that accrues on Subsidized Stafford Loans while borrowers are in school, during a six-month grace period, and during authorized periods of deferment. Unsubsidized Stafford Loans and PLUS Loans are available to borrowers irrespective of their financial need; and borrowers are responsible for paying all the interest that accrues on these loans. FFEL and DL program loans have terms and conditions that may be more favorable to borrowers than private and other non-federal loans. These beneficial terms and conditions include interest rates that are often lower than rates that might be obtained from other lenders, opportunities for repayment relief through deferment and forbearance, loan consolidation, and several loan forgiveness programs.

In recent years, numerous changes have been made to the terms and conditions of FFEL and DL program loans. The Budget Control Act of 2011 (P.L. 112-25) eliminated the availability of Subsidized Stafford Loans to graduate and professional students for periods of instruction beginning 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.


Date of Report: January 11, 2012
Number of Pages: 69
Order Number: R40122
Price: $29.95

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Elementary and Secondary Education Act Reauthorization: Data Options for the English Language Acquisition State Grants Formula (Title III-A)

Cassandria Dortch
Analyst in Education Policy

As the 112th Congress considers reauthorization of the Elementary and Secondary Education Act (ESEA), concerns about the source of data for the Title III-A state formula allocation may be addressed. ESEA Title III-A, the English Language Acquisition, Language Enhancement, and Academic Achievement Act, is the major source of federal funding targeted to the academic achievement of K-12 limited English proficient students (also known as English learners) and recent immigrant students. Title III-A formula grant allocations are made to the states, including the District of Columbia and Puerto Rico, based on the proportion of limited English proficient (LEP) students and immigrant students in each state relative to all states. When the ESEA was last reauthorized by the No Child Left Behind Act of 2001 (P.L. 107-110), statutory provisions of the Title III-A allocation formula directed the Secretary of Education to make allocations based on data from two allowable sources—the Bureau of Census or state reported data, whichever would “yield the most accurate, up to-date numbers.” The most accurate, up-to-date, stable, and relevant source of data for the numbers of LEP and immigrant students has been difficult to discern, and recently the Department of Education commissioned a study from the National Research Council (NRC) to recommend a data source.

The Department of Education currently uses three-year estimates of the numbers of LEP and immigrant students in each state from the American Community Survey (ACS), which is administered by the Bureau of the Census. After reviewing the ACS data and data reported annually by the states, the aforementioned NRC study recently recommended combining both ACS and state reported data to determine the number of LEP students for use in the Title III-A formula allocation. The NRC study specifically recommended calculating the number of LEP students for use in the formula as the sum of 25% of the state reported number of LEP students who scored below the proficient level on the current year’s state English language proficiency assessment (state LEP students scoring below proficient on recent ELPA) and 75% of the ACS three-year estimates of the number of 5 to 21 year old LEP students who speak English less than very well (ACS LEP students).

This report examines how the state allocations would change based on the NRC recommendation and an alternative approach. The alternative approach calculates the number of LEP students for use in the formula as the sum of 25% of the state reported number of LEP students (state LEP students) and 75% of the ACS LEP students. First, the report compares how the value of each state’s allocation would change under the new methodologies compared to the previous year under the current methodology. Second, the report evaluates the estimated year-to-year changes in the value of each state’s allocation under the new methodologies. Large changes in the amount of state grant allocations from one year to the next are not optimal for planning and operating quality language acquisition programs. The analysis presented in this report finds that the NRC recommendation would result in state allocations decreasing by more than 10% for two states in comparison to the FY2011 allocations calculated according to statutory provisions; the alternative approach would result in state allocations decreasing by more than 10% for four states. More striking is the potentially substantial increase in allocation amounts for Alaska and New Mexico. In addition, the year-to-year variability would be lower under the alternative approach than the NRC recommendation. The report discusses several options for reducing variability in the yearto- year allocations during the transition to a new data source and methodology.


Date of Report: January 18, 2012
Number of Pages: 38
Order Number: R42154
Price: $29.95

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Unauthorized Alien Students, Higher Education, and In-State Tuition Rates: A Legal Analysis

Jody Feder
Legislative Attorney

Currently, federal law prohibits states from granting unauthorized aliens certain postsecondary educational benefits on the basis of state residence, unless equal benefits are made available to all U.S. citizens. This prohibition is commonly understood to apply to the granting of “in-state” residency status for tuition purposes. Legislation to amend this federal law has routinely been introduced in each of the last several congressional sessions, including H.R. 1842/S. 952 in the 112th Congress, but such legislation has never been enacted. Meanwhile, some states have passed laws aimed at making unauthorized state residents eligible for in-state tuition without violating this provision. This report provides a legal overview of cases involving immigrant access to higher education, as well as an analysis of the legality of state laws that make in-state tuition rates available to illegal aliens. For a policy analysis of this issue, see CRS Report RL33863, Unauthorized Alien Students: Issues and “DREAM Act” Legislation, by Andorra Bruno.


Date of Report: December 22, 2011
Number of Pages: 9
Order Number: RS22500
Price: $19.95

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Teacher Quality Issues in the Elementary and Secondary Education Act

Jeffrey J. Kuenzi
Specialist in Education Policy

One of the major goals of the Elementary and Secondary Education Act of 1965 (ESEA), as amended by the No Child Left Behind Act of 2001 (NCLB, P.L. 107-110), is to raise the achievement of students who currently fail to meet grade-level proficiency standards. Because student achievement is widely believed to depend largely on the quality of instruction, the law also contains provisions designed to improve teacher quality. These provisions establish professional credentials for teachers and charge states and school districts with developing plans to improve teacher quality. According to the law, these plans must ensure that all core subjectmatter courses are taught by a highly qualified teacher and that poor and minority students have equal access to quality instruction.

To be deemed highly qualified, NCLB requires that teachers possess a baccalaureate degree and a state teaching certificate, and that teachers also demonstrate subject-matter knowledge for their teaching level. Elementary school teachers must show knowledge of basic elementary school curricular areas. Middle and secondary school teachers must demonstrate a high level of competency in all subject areas taught. Demonstration of subject-matter knowledge and competency may be shown by passing a state certification exam or licensing test in the relevant subject(s).

This report examines implementation of the NCLB requirement and examines the extent to which schools achieved the law’s goal of placing a highly qualified teacher in every classroom. After describing the highly qualified teacher requirement in detail, the report analyzes data from a national survey of schools conducted a year before NCLB became law. These data suggest that as many as four out of five teachers met the NCLB requirement prior to its enactment. Data reported throughout implementation of the law indicate that the proportion of highly qualified teachers increased each year, but that no state has reached 100%. In addition, analysis of these data also support concerns about the equitable distribution of teaching quality between poor and nonpoor schools.

This report concludes with a discussion of teacher quality issues that may be considered as the ESEA reauthorization process unfolds. Several of these issues have been the subject of waiver authority exercised by the Secretary of Education under both the current and previous administrations. The 112th Congress has taken up these issues along with reauthorization of the rest of the ESEA.


Date of Report: December 21, 2011
Number of Pages: 17
Order Number: R42127
Price: $29.95

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