There has been an ongoing debate as to whether direct loans by the federal government or loans from private lenders guaranteed by the federal government are a better way to help students afford a college education. Some have been critical of spending federal money to guarantee private lenders' loans. "Ten years of government data now show that the guaranteed student loan program costs the government 10 times as much as Direct Loans, including administrative expenses." (18)

According to the Congressional Budget Office (CBO), while the initial costs of a direct loan are higher, guaranteed loans cost the government more than direct loans over a ten year period.

$3,000 FFEL Guaranteed Loan (subsidy rate of 15%) (over ten year period)
Upfront processing fees: $196
Special Allowance payments: $242
Loan Processing Fee: $12
TOTAL COST: $450

$3,000 Direct Loan (subsidy rate of -2.1%) (over ten year period)
Disbursement: $3,000
Borrower's Origination fee: -$45
Repayment of,
Principle: -$2,151
Interest: -$866
TOTAL COST: -$63

A complete version of the CBO chart and report is available here.