Homeschooling and Education

The Direct student loans program began about 15 years ago and, in true American fashion, was designed to cut out the middle man. Instead of having banks, credit unions and other private busincesses lend money to students and parents, the Federal government loans the money directly.

Direct programs overlap the alternative, called FFELP (Federal Family Education Loan Program). The latter is the acronym for programs that work through private lenders. Since they duplicate in some ways the FFEL programs, it’s important for lenders to target which they want. Both offer Stafford and PLUS loans.

Direct Loans have the same criteria for eligibility. They follow the same need-based guidelines, or have the same credit check requirements for non-need-based programs. Providing the same programs according to the same standards raises a natural question: how to decide between them?

In part, the decision involves choosing which of two servicers to deal with. Both provide customer service personnel to answer questions. In some cases, the private lender will be more flexible and helpful and the government more bureaucratic or indifferent. In others, the situation is reversed.