ArtsAutosBooksBusinessEducationEntertainmentFamilyFashionFoodGamesGenderHealthHolidaysHomeHubPagesPersonal FinancePetsPoliticsReligionSportsTechnologyTravel
  • »
  • Personal Finance»
  • Mortgages & Loans

Student Loans - Where the Money Comes From

Updated on June 13, 2011
This is one view of the University of Chicago
This is one view of the University of Chicago

Who exactly funds the Student Loans out there?

Who are the major "players" when it comes to loaning money to students in the USA? Lets start with the United States Government.

The US Government both creates and monitors the legislation having to do with federal student loans. It also appropriates funds funds for those student loans as well as loan forgiveness programs. The government basically borrows funds from the US treasury to lend directly to the students through the Direct Loan Program.

Another major player is the US Department of Education, in particular. This entity administers both student loans and financial aid programs, which include the FAFSA and SAR, as well as reimburses the guarantors who have paid back defaulted loans. The US Department of Education makes Special Allowance Payments, or SAPs, to lenders. They sometimes also take on the responsibility of collecting on a defaulted loan.

For Profit, and Non Profit Lenders

Both For Profit and Non Profit lenders help to supply the funds for many student loans under the FFEL program, which is the Federal Family Education Loan program. The funds for the loans in these cases might come from investors, financial institutions and banks. Sometimes they come from the issuing of bonds. Lenders are protected from risk by the United States Government which in turn encourages them to put into the programs. They might service these loans directly or contract them with loan servicing companies which would collect payments and work with the students doing the borrowing.

Investors and Guarantors

The investors include millions of people that place their savings into banks and financial institutions. The banks loan out this money and also bring in a steady rate of return. They rely on the interest paid by the student's funds to grow their own retirement funds, their own children's college funds, and pension funds.

Guarantors predate the Federal Family Education Loan program (FFEL). They act as student loan insurers and administrators. There are a few dozen active guaranty agencies of different types out there. They reimburse private lenders for losses, like when student loans go into default. They also act as a collection "agency" for the federal government, and will assist borrowers who are having a hard time paying their loans. Guarantors will even act as lenders themselves, on occasion. There are some guaranty agencies out there that will administer state level loans and financial aid programs.


Do you think Student Loans are a good idea, when a student is out of options financially to pay for college?

See results

Comments

    0 of 8192 characters used
    Post Comment

    • oceansnsunsets profile image
      Author

      Paula 7 years ago from The Midwest, USA

      Dallas, so glad you wanted to share this with your son. Thank you very much!

    • dallas93444 profile image

      Dallas W Thompson 7 years ago from Bakersfield, CA

      Enjoyed and shared with my son. Flag up and useful!

    • oceansnsunsets profile image
      Author

      Paula 7 years ago from The Midwest, USA

      Thank you, Glemoh! Glad you stopped by.

    • Glemoh101 profile image

      Glemoh101 7 years ago

      Great information , thank you.

    working

    This website uses cookies

    As a user in the EEA, your approval is needed on a few things. To provide a better website experience, hubpages.com uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

    For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at: "https://hubpages.com/privacy-policy#gdpr"

    Show Details
    Necessary
    HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
    LoginThis is necessary to sign in to the HubPages Service.
    Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
    AkismetThis is used to detect comment spam. (Privacy Policy)
    HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
    HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
    Amazon Web ServicesThis is a cloud services platform that we used to host our service. (Privacy Policy)
    CloudflareThis is a cloud CDN service that we use to efficiently deliver files required for our service to operate such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
    Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the googleapis.com or gstatic.com domains, for performance and efficiency reasons. (Privacy Policy)
    Features
    Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
    Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
    Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
    Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
    Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
    VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
    PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
    Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
    MavenThis supports the Maven widget and search functionality. (Privacy Policy)
    Marketing
    Google AdSenseThis is an ad network. (Privacy Policy)
    Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
    Index ExchangeThis is an ad network. (Privacy Policy)
    SovrnThis is an ad network. (Privacy Policy)
    Facebook AdsThis is an ad network. (Privacy Policy)
    Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
    AppNexusThis is an ad network. (Privacy Policy)
    OpenxThis is an ad network. (Privacy Policy)
    Rubicon ProjectThis is an ad network. (Privacy Policy)
    TripleLiftThis is an ad network. (Privacy Policy)
    Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
    Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
    Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
    Statistics
    Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
    ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
    Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)