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April 16, 2010


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Linda Hayes

Not sure why you describe student loans as indicated in your report. Your observations need clarity as to why the trends or changes are what they are. As you know, the truth is that Direct Loans are required for all schools for 2010-11 so that is one reason for the 'trend'. Many FFELP loans have been sold to the government, and continue to be sold.

When you speak of student loans, the majority of them are Stafford Loans, not because they are 'popular' as you stated, but rather, they are the first ones offered to students when they file their FAFSA by all schools and the interest is paid for by the government for the Stafford subsidized loan, thus the high number of Stafford Federal Loans (whether Direct or FFELP). I've worked in a variety of colleges, from public to private and most schools award aid on a hiarchy of awarding Perkins (5% fixed interest), then the Subsidized Stafford, Unsubsidized Stafford, Grad Plus, Parent Plus and then alternative loans.

Many parents do not want to take out the Parent PLUS loan in their name and are uneducated that these loans will save interest their student might pay on another alternative educational loan, that by the way, the Parents still usually need to co-sign. Once a parent is counseled, many times they will take out the Parent loan over an alternative loan. Parents are also unaware they can defer the interst on the Parent PLUS Loans. It takes time for this information to get to the public. The terms on these loans are quite a bit different and the public is unaware in general.

Your numbers are interesting, but it would be nice to add clarity to their interpretation so the whole picture is understood of what these numbers really mean. I know you report from on information from a data center, but data is not complete without perspective. If you are analyzing, it might be a good idea to describe the possible cause for loan trends we see today.

Nate Buhrman

Today I pulled Q2 DL and FFEL data from the data center website referenced above. A quick summation of the $ of Disbursements columns on the Award Year Summary tabs shows a variance of what you are reporting here for disbursements for the first two quarters on eacy of the loan types.

i.e. FFEL Subsidized shows a total of 9,298,580,579 in the $ of Disbursements column whereas you report $10,199 bln.

I'm sure there is an explanation for this variance and was hoping you could help me understand it.

Tim Ranzetta


Thanks for your comment. Please send along your spreadsheet. I ran the numbers again and am still getting $10.199 billion for FFEL Subsidized for 2Q YTD.



Tim Ranzetta


Thanks for taking the time to offer your insights and your experience as a financial aid administrator. Much appreciated! As for why federal loans continue to rise, here a few contributing factors:
1. Increased difficulty in getting private loans. Even though students should consider federal first, data from 2007-08 suggested that 2/3 of private loan borrowers had not maximized federal loans. With private loans down almost 70% from their peak, private loans are not nearly as prevalent as they once were.
2. Ongoing tuition increases with state institutions seeing high single digit increases in many instances due to cutbacks in state support.
3. Families being hit by triple whammy: stock prices still down 30% from their peak, home prices also down 30% in many parts of the country and a stubbornly high unemployment rate. This affects 529 plans, home equity loans and current income which have all been sources of financing college educations. Federal loans given their limited credit requirements remain a reliable source.
4. More middle-career workers returning to school to learn new trade and skills. Savings may be limited so they seek to use loans to finance their education.

Any other thoughts?




The borrower owes what is on the promissory note, although this can be adjusted later for changes in the borrower's circumstances. Thus disbursements is a poor measure of loan volume. It is not what the borrower owes.

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