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Federal education loans are available either through the William D. Ford Federal Direct Loan Program ("Direct Loans") or the Federal Family Education Loan Program ("FFEL Program" or "FFELP"). The FFEL Program is sometimes referred to as the federally-guaranteed student loan program.
The choice of loan program available to a borrower depends on the college. About three quarters of colleges participated in FFELP and one quarter participated in Direct Loans in FY2008. But about a third of the Direct Loan colleges also participate in FFELP to maximize borrower choice. Borrowers have a choice of lenders in the FFEL program but not in the Direct Loan program.
Both programs offer Stafford, PLUS and Consolidation loans, but there are some differences.
Differences between Direct Loans and FFELP
Source of Funds. In the FFEL program the funds for the loans come from banks and other financial institutions. In the Direct Loan program the funds for the loans come directly from the US Department of Education, which in turn gets the funds from the US Treasury.
Direct, Indirect, and FFEL Student Loans: What's the Difference?
If you have a federal student loan, find out if its a direct loan, indirect loan, or Federal Family Education Loan (FFEL).