The United States Department of Education is a Cabinet-level department of the United States government. The Department of Ed. is administered by the United States secretary of education.
The function of the Department of Ed. is to “establish policy for, administer and coordinate most federal assistance to education, collect data on US schools, and to enforce federal educational laws regarding privacy and civil rights.”
As of July 1, 2010, included in this mandate is providing student loans to secondary education students through a program called the William D. Ford Federal Direct Loan Program (sometimes referred to as “Direct Loan” or “FDL”). Before July 1, 2010, federal student loans were originated by private banks who gave out loans that were guaranteed by the federal government.
Under the Direct Loan program, the U.S. Department of Education is the originator of federal student loans including (1) Direct Subsidized Loans, (2) Direct Unsubsidized Loans, (3) Direct PLUS Loans, and (4) Direct Consolidation Loans.
The Department of Education hires companies called “loan services” to administer the federal student loans and debt collectors to collect defaulted loans.
The administration of federal student loans includes repayment programs designed to keep borrowers out of default. Some of these programs include income driven repayment programs where a borrower’s monthly student loan payment is determined based upon a percentage of the borrower’s income.