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 expenses. Four types of loans are offered: Subsidized Stafford Loans for undergraduate students; 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 multiple loans into a single loan. For FY2014, ED estimates that 21.9 million loans (not including Consolidation Loans) totaling $112.1 billion will be made to students and their parents through the DL program. FFEL program loans are no longer being made; however, approximately $294 billion in outstanding FFEL program loans are due to be repaid over the coming years.

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 undergraduate students demonstrating financial need. With certain exceptions, the federal government pays the interest that accrues on Subsidized Stafford Loans while the borrower is enrolled in school on at least a half-time basis, during a six-month grace period thereafter, and during periods of authorized 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 nonfederal 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.

This report discusses major provisions of federal student loans made available through the DL program and previously made through the FFEL program. It focuses on provisions related to borrower eligibility, loan terms and conditions, borrower repayment relief, and loan default and  its consequences for borrowers. These topics are principally discussed with regard to loans currently being made through the DL program, or made in the recent past through either program. The report also provides detailed historical information on annual and aggregate borrowing  limits, loan fees, and student loan interest rates.

Date of Report: August 14, 2013
Number of Pages: 68
Order Number: R40122
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Affirmative Action and Diversity in Public Education: Legal Developments

Jody Feder
Legislative Attorney

More than three decades after the Supreme Court ruling in Regents of the University of California

v. Bakke, the diversity rationale for affirmative action in public education remains a topic of political and legal controversy. Many colleges and universities have implemented affirmative action policies not only to remedy past discrimination, but also to achieve a racially and  ethnically diverse student body or faculty. Justice Powell, in his opinion for the Bakke Court, stated that the attainment of a diverse student body is “a constitutionally permissible goal for an institution of higher education,” noting that “[t]he atmosphere of ‘speculation, experiment, and creation’ so essential to the quality of higher education is widely believed to be promoted by a diverse student body.” In subsequent years, however, federal courts began to question the Powell rationale, unsettling expectations about whether diversity-based affirmative action in educational admissions and faculty hiring is constitutional under the equal protection clause of the Fourteenth Amendment.

After a series of conflicting lower court rulings were issued regarding the use of race to promote a diverse student body, the Supreme Court agreed to review the race-conscious admissions policies used by the undergraduate and law school admissions programs at the University of Michigan. In Grutter v. Bollinger, a 5 to 4 majority of the Justices held that the University Law School had a “compelling” interest in the “educational benefits that flow from a diverse student body,” which justified its race-based efforts to assemble a “critical mass” of “underrepresented” minority students. But in the companion decision, Gratz v. Bollinger, six Justices decided that the University’s policy of awarding “racial bonus points” to minority applicants was not “narrowly tailored” enough to pass constitutional scrutiny. The decisions resolved, for the time being, the doctrinal muddle left in Bakke’s wake. And because the Court’s constitutional holdings translate  to the private sector under the federal civil rights laws, nonpublic schools, colleges, and universities are likewise affected.

However, the Grutter and Gratz decisions did not address whether diversity is a permissible goal in the elementary and secondary educational setting. To resolve this question, the Supreme Court agreed to review two cases that involved the use of race to maintain racially diverse public schools and to avoid racial segregation. In a consolidated 2007 ruling in Parents Involved in Community Schools v. Seattle School District No. 1, the Court struck down the Seattle and Louisville school plans at issue, holding that they violated the equal protection guarantee of the Fourteenth Amendment.

More recently, the Court has once again taken up the issue of affirmative action in higher education in two separate cases. In its 2013 ruling in Fisher v. University of Texas at Austin, the Court reaffirmed its holding in Grutter, but nevertheless struck down a race-conscious undergraduate admissions plan at the University of Texas at Austin. Meanwhile, the Court is poised to consider a different question involving racial preferences in higher education during the upcoming 2013-2014 term when it hears arguments in Schuette v. Coalition to Defend Affirmative Action. In Schuette, the Court will determine whether Michigan’s Proposal 2, which prohibits the

use of racial preferences in higher education, is constitutional.

Date of Report: August 9, 2013
Number of Pages: 33
Order Number: RL30410
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