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Encyclopedia > Office of Federal Student Aid
Theresa S. Shaw, Chief Operating Officer, Office of Federal Student Aid
Theresa S. Shaw, Chief Operating Officer, Office of Federal Student Aid

Federal Student Aid, an office of the U.S. Department of Education, plays a central and essential role in America's postsecondary education community. The United States Department of Education was created in 1979 (by PL 96-88) as a Cabinet-level department of the United States government, and began operating in 1980. ... The University of Cambridge is an institute of higher learning. ...



Federal Student Aid's (FSA) core mission is to ensure that all eligible Americans benefit from federal financial assistance—grants, loans and work-study programs—for education beyond high school. The programs they administer comprise the nation's largest source of student aid: during the 2004-05 school year alone, FSA provided approximately $74 billion in new aid to nearly 10 million postsecondary students and their families. A staff of 1,100 is based in 10 cities in addition to their Washington headquarters.

Some of the most visible and essential services are the development, distribution, and processing of the Free Application for Federal Student Aid (FAFSA), the fundamental qualifying form used for all federal and government-guaranteed commercial lenders' programs—as well as for many state, regional and private student aid programs. By filling out the online or paper FAFSA, applicants start the process of qualifying for aid. Each year FSA's staff processes approximately 14 million FAFSAs. The Free Application for Federal Student Aid (known as FAFSA), is a form that must be filled out annually by university students (both undergraduate and graduate) and sometimes their parents in the United States to determine their eligibility for federal student financial aid (including grants, loans, and work-study programs). ...


While overseeing $420 billion of outstanding student loans, FSA ensures that all partners in the student aid community—schools, lenders, servicers and guaranty agencies—operate fairly, honestly and efficiently. Another key role they perform is to make students and their families aware that financial aid is available and is a necessary first step to further education. They distribute numerous publications, host multiple Web sites and run several customer call centers. Most of these services are provided in Spanish as well.

The Federal Student Aid team committed to making education beyond high school more attainable for all Americans, regardless of socioeconomic status.

Student Aid

Federal Student Aid is financial help for students enrolled in eligible programs at participating schools to cover school (a four-year or two-year public or private educational institution, a career school or trade school) expenses, including tuition and fees, room and board, books and supplies, and transportation. Most federal aid is need-based. The three most common types of aid are grants, loans, and work-study.

Grants are a type of financial aid that does not have to be repaid. Generally, grants are for undergraduate students and the grant amount is based on need, cost of attendance, and enrollment status. Federal Pell Grants for the 2006-2007 school year will range from $400 to $4,050. Federal Supplemental Educational Opportunity Grants will range from $100 to $4,000.

Federal Student Aid had total net costs of $31.2 billion during fiscal year 2005
Federal Student Aid had total net costs of $31.2 billion during fiscal year 2005

Loans are borrowed money that must be repaid with interest. Both undergraduate and graduate students may borrow money. Parents may also borrow to pay education expenses for dependent undergraduate students. Maximum loan amounts depend on the student's year in school.

    • Federal Stafford Loans are made to students and PLUS Loans are made to parents through two loan programs:
      • William D. Ford Federal Direct Loan (Direct Loan) Program: Eligible students and parents borrow directly from the federal government at participating schools. Direct Loans include Direct Stafford Loans, Direct PLUS Loans, and Direct Consolidation Loans.
      • Federal Family Education Loan (FFEL) Program: Private lenders provide federally guaranteed funds. FFELs include FFEL Stafford Loans, FFEL PLUS Loans, and FFEL Consolidation Loans.
    • Federal Perkins Loans are offered by participating schools to provide students who demonstrate the most need with low-interest loans.

Work-study lets you earn money while enrolled in school to help pay for education expenses.

History of Financial Aid

  • 2006 The single holder rule was repealed as part of Public Law 109-234, the Emergency Supplemental Appropriations Act for Defense, the Global War on Terror, and Hurricane Recovery, 2006. The repeal is effective June 15, 2006. All borrowers may now consolidate their loans with any lender. Previously, borrowers who had all their loans with a single lender were required to consolidate their loans with that lender. This increases competition for student loans, and may lead to improved benefits and lower costs for borrowers.
  • 2005 Higher Education Reconciliation Act of 2005 (HERA 2005) (part of the Deficit Reduction Act of 2005) cuts $12.7 billion from student aid: switches Stafford and PLUS interest rates to fixed rates of 6.8% and 8.5%, keeps maximum Pell Grant at $4,050 for fourth year in a row, gradually reduces loan fees from 4% to 1%, increases some annual loan limits without increasing cumulative loan limits, changes financial aid treatment of prepaid tuition plans, allows graduate and professional students to borrow PLUS loans, eliminates floor income guarantee and some 9.5% loan recycling, adds SMART Grants for less than 10% of Pell Grant recipients, repeals early repayment status loophole, and adds restrictions to School as Lender, among other changes.
  • 2005 Student loan interest rates reach historical low, allowing borrowers who consolidate during the in-school period to lock in a rate of 2.88%. Early repayment status loophole allows continuing students to consolidate.
  • 2003 US Supreme Court rulings on affirmative action cases Grutter v. Bollinger and Gratz v. Bollinger
  • 2001 Economic Growth and Tax Relief Reconciliation Act of 2001 (enhanced section 529 plans and other education tax credits, renamed Education IRAs as Coverdell accounts)
  • 2000 College Scholarship Fraud Prevention Act of 2000 (Public Law 106-420)
  • 1998 Higher Education Amendments of 1998 (renamed SSIG as LEAP, created GEAR UP, suspended student aid eligibility for drug convictions, added Extended Repayment)
  • 1997 Taxpayer Relief Act of 1997 (Hope Scholarship, Lifetime Learning Tax Credit, Education IRAs, income exclusion for $5,250 in employer education benefits, tax deduction for up to $2,500 in student loan interest)
  • 1997 Need-Based Educational Aid Antitrust Protection Act of 1997 (limits exchange of financial information between colleges)
  • 1996 FTC Project ScholarScam launches crackdown on scholarship scams
  • 1996 US 5th Circuit Court of Appeals ruling in Hopwood v. Texas prohibits the use of race or ethnicity in admissions and financial aid in Texas, Louisiana, and Mississippi
  • 1996 California voters adopt Proposition 209, banning the use of race in college admissions and financial aid at California public colleges and universities
  • 1994 US 4th District Court of Appeals decision in Podberesky v. Kirwan requires that evidence of past discrimination must be clearly evident in a case involving a race-based scholarship
  • 1993 Student Loan Reform Act (established direct lending, added income contingent repayment)
  • 1993 National Service Trust Act (AmeriCorps provides education grants for students age 17 and over who perform community service)
  • 1992 Higher Education Amendments of 1992 (required FAFSA be free, added Direct Lending pilot project, added unsubsidized Stafford loans, replaced two federal need analysis formulas -- the Pell Grant Formula and the Congressional Methodology -- with a single Federal Need Analysis Methodology, changed definition of "independent student", added community service requirement to Federal Work-Study, eliminated PLUS loan limits)
  • 1991 Veterans' Educational Assistance Amendments of 1991
  • 1990 Omnibus Budget Reconciliation Act of 1990 (elimination of student aid eligibility at high default schools)
  • 1989 Student Loans Reconciliation Amendments
  • 1988 Tax Reform Technical Amendments (created Education Savings Bonds)
  • 1988 Supplemental Loans to Students Reform Bill
  • 1987 GSL Program renamed the Stafford Loan Program
  • 1986 Michigan Education Trust established as the first prepaid tuition plan
  • 1986 Reauthorization of the Higher Education Act (added Congressional Methodology as a second federal need analysis methodology, gave financial aid administrators broad discretion through "professional judgment", required financial need for the GSL interest subsidy, NDSL renamed Perkins Loan, created Supplemental Loan to Students (SLS) for graduate, professional and independent students, restricted PLUS loans to parent borrowers, added FFEL consolidation loans)
  • 1985 Montgomery GI Bill - Active Duty
  • 1983 Student Loan Consolidation and Technical Amendments Act of 1983 (GSL 8% interest rate, EFC)
  • 1982 Defense Authorization Act of 1982/1983 (Selective Service registration required for financial aid eligibility)
  • 1981 "I Have A Dream" Project founded by Eugene Lang at P.S. 121 in Harlem
  • 1981 Omnibus Budget Reconciliation Act (Federal student loans depend on financial need again and add an origination fee)
  • 1980 US Department of Education elevated to a cabinet-level department.
  • 1980 Reauthorization of the Higher Education Act (established PLUS loans, BEOG renamed Pell Grants after Senator Claiborne Pell of Rhode Island)
  • 1979 Department of Education Organization Act, PL96-88
  • 1978 Middle Income Student Assistance Act (expanded federal student assistance programs to include middle-income students in addition to the low-income students by expanding eligibility for the BEOG grant and eliminating income restrictions for GSL loans)
  • 1978 US Supreme Court ruling in Regents of the Univ. of California v. Bakke eliminated the use of quotas in college admissions
  • 1976 Education Amendments of 1976, PL94-482, Reauthorization of the Higher Education Act (added SAP requirements and state loan-guarantee agencies)
  • 1976 CSS introduces the Financial Aid Form (FAF) as a replacement for the Parent's Confidential Statement (PCS) and Student's Financial Statement (SFS)
  • 1975 Harry S Truman Memorial Scholarship Act, PL93-642 (scholarships for public service)
  • 1974 Family Educational Rights and Privacy Act (FERPA)
  • 1974 National Task Force on Student Aid Problems develops Uniform Methodology (UM)
  • 1972 Student Loan Marketing Association (Sallie Mae) established
  • 1972 Education Amendments of 1972, PL92-318 (federal matching grants for state student incentive grants)
  • 1972 Basic Educational Opportunity Grant (origin of the Pell Grant, first federal need analysis formula). Maximum grant was initially $452.
  • 1972 Educational Opportunity Grant renamed Supplemental Educational Opportunity Grant (SEOG)
  • 1968 Higher Education Amendments of 1968, PL 90-575
  • 1966 National Association of Student Financial Aid Administrators (NASFAA) Created. NASFAA was initially called the National Student Financial Aid Council, but was renamed in 1969. Alan W. Purdy was the first chairman of NASFAA.
  • 1965 Educational Opportunity Grant Program (precursor to Pell Grant)
  • 1965 Guaranteed Student Loan (GSL) Program, precursor to Stafford Loan Program
  • 1965 Higher Education Act of 1965, PL89-329 (authorized most federal student financial aid programs, including the Educational Opportunity Grant Program and the Guaranteed Student Loan Program)
  • 1964 Economic Opportunity Act of 1964, PL88-452 (established college work-study and authorized Head Start, Upward Bound, and VISTA)
  • 1964 Civil Rights Act of 1964, PL88-452
  • 1963 Health Professions Educational Assistance Act of 1963, PL88-204 (student loans)
  • 1961 CSS Introduces the Married Student Supplement which later evolved into the Student's Financial Statement (SFS)
  • 1958 National Defense Education Act, PL85-864 (graduate fellowship program and the National Defense Student Loan Program, the precursor to the Perkins Loan Program, first Federal student aid program for low-income students)
  • 1956 CSS Introduces the Parent's Confidential Statement (PCS)
  • 1954 College Scholarship Service (CSS) Created
  • 1953 John Monro of Harvard presents first need analysis formula
  • 1952 Veterans Readjustment Assistance Act (extended GI Bill benefits to Korean War Veterans)
  • 1946 Fulbright Scholarships established
  • 1944 GI Bill (Servicemen's Readjustment Act)
  • 1935 National Youth Administration (employment for college students)
  • 1935 Indiana Student Financial Aid Association established (first state financial aid association)
  • 1913 New York State established the Regents College Scholarship Program
  • 1867 Authorized creation of US Department of Education
  • 1840 First student loan program at Harvard University
  • 1643 First scholarship established by Lady Anne Radcliffe Mowlson at Harvard University

The Deficit Reduction Act was passed by the US Congress in 1993 under the Clinton administration. ... A Stafford loan is a loan product offered to students enrolled in American institutions of higher education to help finance their education. ... The Pell Grant program is a post-secondary education subsidy run by the Federal government of the United States. ... The Supreme Court Building, Washington, D.C. The Supreme Court Building, Washington, D.C., (large image) The Supreme Court of the United States, located in Washington, D.C., is the highest court (see supreme court) in the United States; that is, it has ultimate judicial authority within the United States... Holding University of Michigan Law School admissions program that gave bonus points for certain racial minorities did not violate the Fourteenth Amendment. ... Holding A state universitys admission policy violated the Equal Protection Clause of the Fourteenth Amendment because its ranking system gave an automatic point increase to all racial minorities rather than making individual determinations. ... The Economic Growth and Tax Relief Reconciliation Act of 2001 was a sweeping piece of tax legislation in the United States. ... A 529 plan is a savings plan in the United States designed to give tax advantages to encourage savings for future higher education costs. ... The Taxpayer Relief Act of 1997 reduced several federal taxes in the United States. ... The first successful legal challenge to racial preferences in student admissions since Bakke. ... Proposition 209, a voter referendum passed in 1996, outlaws discrimination and preferential treatment based on race, sex, color, ethnicity, or national origin in the operation of public employment, public education, or public contracting. ... The G. I. Bill of Rights or Servicemens Readjustment Act of 1944 provided for college or vocational education for returning World War II veterans as well as one-year of unemployment compensation. ... The United States Department of Education was created in 1979 (by PL 96-88) as a Cabinet-level department of the United States government, and began operating in 1980. ... The Family Educational Rights and Privacy Act of 1974 (FERPA) is Title 34 United States Code and part 99 of the United States Code of Federal Regulations. ... SLM Corporation (NYSE: SLM), commonly known as Sallie Mae, is United Statess number 1 paying-for-college company, managing more than $112 billion in student loans for more than 8 million borrowers, and employing 10,000 individuals at offices nationwide. ... President Johnson signs the Civil Rights Act of 1964. ... The National Defense Education Act (NDEA) is a United States Act of Congress, passed in 1958 providing aid to education in the United States at all levels, both public and private. ... The G. I. Bill of Rights or Servicemens Readjustment Act of 1944 provided for college or vocational education for returning World War II veterans as well as one-year of unemployment compensation. ...





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