Federal Direct Student Loan Program

The William D. Ford Federal Direct Loan Program (also called FLDP, FDSLP, and Direct Loan Program) provides "low-interest loans for students and parents to help pay for the cost of a student's education after high school. The lender is the U.S. Department of Education ... rather than a bank or other financial institution."

Following the passage of the Health Education Reconciliation Act of 2010, the Federal Direct Loan Program is the sole government-backed loan program in the United States.

 Political history of the program

Congress passed a version of the Direct Loan program under President George H. W. Bush, but Bush promised to veto it. Candidate Bill Clinton promised that he would sign such legislation into law if elected, and the Direct Loan program was one of the first laws he signed in 1993.

Funding for the Federal Direct Student Loan Program has decreased from just over $7 billion in 2006 to $509 million budgeted for 2008.

Democrats have made more student-favorable Direct Loan terms part of their platform. Under Obama's new budget, all new loan originations will be under the Direct Loan program by July 2010, netting $6B in annual savings. The bill approving the measure passed the House of Representatives on September 17, 2009.

In comparison, other countries 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 183 or more consecutive days (retroactive for all former students who had government loans), who can repay their loans based on their income after they graduate. This program was a Labour Party promise in the 2005 general election.

(source:wikipedia)