Federal Direct Student Loan Program

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."

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 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.

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.

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