The William D. Ford Federal Direct Loan Program (also called FDLP, FDSLP, and Direct Loan Program) as defined by the United States Department of Education "provides another way to borrow money to pay for education after high school. Schools that participate in Direct Loans receive loan funds directly from the U.S. Department of Education, and disburse them to eligible students."
Historical Background
In 1990, under U.S. President George H.W. Bush, the Federal Credit Reform Act was signed which, according to the American think tank and civic enterprise New America, "it included a larger budget reconciliation bill entitled the Omnibus Reconciliation Act of 1990 where all government loan programs -- whether guarantees of commercial loans or loans made directly from a federal agency, would have to account for their full long-term expenses, and income. Every loan program would have an estimated 'subsidy cost." Then under U.S. President Bill Clinton, the Omnibus Reconciliation Act of 1991 came into law where universities started as mere volunteers in participating while giving the U.S. Secretary of Education "the power, if necessary, to require colleges to switch until at least 60 percent of loans nationwide were direct [loans]." Then a tense political battle emerged in 1994 with the U.S. Republican leadership taking over the U.S. Congress by wide margins. They aimed to target this new program for elimination despite the lack of public support, but there was a sense of disillusion among those working in higher education. Their efforts failed with the passing of the Omnibus Consolidated Appropriations of 1997 where they made the program optimal. It wasn't until the election of U.S. President Barack Obama set out a budget proposal for fiscal year 2010 in suggesting to the U.S. Congress (then ran by the U.S. Democratic Party) to completely eliminate the program to only have these loans come directly from from the U.S. Department of Education; cutting out private actors entirely. This was signed into law on July 1, 2010.
When comparing this program to its international counterparts, other countries (mostly in Western Europe) have also experimented with government-sponsored loan programs. New Zealand, for instance, now offers 0% interest loans to students who live in New Zealand for one-hundred, and eighty three (183) or more consecutive days (retroactive for all former students who had government loans). This was ultimately designed to help their students repay their loans based on their income after they graduate while other countries within the area offer similar programs, or quite frankly by making their public universities free for lawful citizens.
Relating to Monetary Spending (Program Size)
When it comes to the Federal Student Aid (FSA) loan portfolio, for fiscal year 2012, its operational highlights reveal that the total balance for its student aid portfolio was at 948 Billion USD as of September 30, 2012 from 848 Billion USD from just a year prior.
Proponents & Criticisms (Perspectives on Federal Direct Loans)
Some believe that the growth of student loan debt is reaching problematic levels. Economists point to a drag on the economy as a whole because of high levels of student debt. One way that has been suggested to help students with loan repayment is to lower interest on balances. U.S. Senator Richard Blumenthal urged, "We must reduce the student loan interest rate back to 3.4 percent immediately, and then even lower, and develop ways for past students to reduce and erase the $1 trillion in existing debt. The failure of Congress to act now threatens our all too slow and fragile economic recovery and job creation." Another way to deal with debt to income levels is to require higher learning accountability. "Only recently have government regulators demanded accountability for the educational benefits universities produce and the efficiency with which they produce them: What does college cost? How many students are admitted? How many graduate? How long does it take them to graduate? How many get good jobs? At the same time, accrediting bodies have changed their measurement emphasis from inputs and activities to outcomes...Students want not just high-paying jobs, but an acceptable ratio of starting salary to student debt. Governments likewise care not just about the number of graduates but the total cost of producing each graduate.†These questions warrant consideration in the future conversations about the Federal Student Loan Program.
References
External links
- U.S. Dept. of Education: Direct Loans
- DirectLoans via StudentLoans.gov (https://www.studentloans.gov/myDirectLoan/index.action)
- Loans via Federal Student Aid (https://studentaid.ed.gov/types/loans)
- MyFedLoan Repayment Services (https://myfedloan.org/)
- William D. Ford Federal Direct Loan Program (https://www2.ed.gov/programs/wdffdl/index.html)
