The Costs of a college education have soured over the last 30 years. Secretary of Education Spellings has noted, "college tuition has outpaced inflation, family income, even doubling the cost of healthcare." (11) With the increasing costs of higher education students are forced to borrow more to finance their education and "are often so saddled with debt they can't buy a home or start a family." (11) Only ten years ago the average debt of a graduating Senior was $9,250. Today, it's over twice that - $19,200. (12) Private student loans amounted to almost $14 billion dollars in 2004-2005. This is over "10 times the amount borrowed a decade ago." (13) All of this despite 75% of students having part-time jobs. (12)

Federal Student Loans Options
There are several different types of loans available to college students to assist them in paying for college expenses. Generally speaking, with certain loans the lender in the federal government (Direct loans) and with others the lender is a private organization (Federal Family Education Loan Program - "FFEL"). (14)

Direct loans
The Department of Education's Direct Loan Program provides loans to help students pay for education after high school. Under this program, the Department of Education provides loans directly to qualifying applicants. (15)

Federally Guaranteed loans
In the FFEL Program, banks and other private lenders provide loans to students. (15) For loans arranged through the FFEL program, the government guarantees the loans in the event of student's inability or failure to repay the full amount.

Stafford Loans are for undergraduate, graduate and professional students. Financial need is not a requirement to obtain a Stafford Loan. For students with demonstrated financial need, the U.S. Department of Education will pay the interest that accrues during certain periods. Stafford loans can be either Direct or guaranteed FFEL loans. Direct Stafford loans are administered under the William D. Ford Federal Direct Student Loan Program. With FFEL Stafford Loans (or Federal Stafford Loans), private lenders provide funds that are guaranteed by the federal government. These loans are repaid to the bank or private lender that made the loan. (16)

There is a limit on the amount undergraduates who are dependents can borrow through the Stafford loan program - $23,000. That limit has not increased since 1992. "During the same period, the average annual cost of college tuition and room and board at public, four-year colleges has risen 135% to $12,796 this year, according to the College Board." (17)

There are also limits on how much undergraduates can borrow each year. "On July 1, 2007, the amount of Stafford loans college freshmen can borrow will rise to $3,500 from $2,625, while limits for sophomores will increase to $4,500 from $3,500. But that's still well short of the annual cost of attending many private - and even some public - colleges." (17)

For both undergraduate and graduate students with exceptional financial need there are Perkins loans. With Perkins Loans your school is your lender. The loan is made with government funds with a share contributed by the school. You must repay this loan to your school. You can borrow up to $3,000 for each year of undergraduate study. The total amount you can borrow as an undergraduate is $15,000. These loans are have low (5%) interest rates. (18)

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Direct loans v Guaranteed loans