You applied to several schools and received admission offers. You assessed several award packages and chose your intended school. If you are like most students and their families, you plan to borrow money through the Stafford Loan Program to help to pay for your education. Lest you be overcome by the tuition blues, you should view The Stafford Loan as an investment in your future.

You don't actually see the money or get a check in the mail when you are awarded a Stafford loan. How you receive that money depends on whether your school is:

  1. a direct lending school or
  2. a part of the Federal Family Education Loan Program (FFELP)

A direct lending school removes the "middle–man" from the equation, allowing families to obtain education loans without using a bank, credit union or private lender. Simply put—there's just you, your institution, and the federal government. If you attend such a school, you'll take out your federal loans through the school itself. However, if you still need additional funding, you may use private lenders for alternative loans to supplement your aid package.

With the Direct Loan program, your university will act as the loan's originator. Direct lending schools offer an Income Contingent Repayment option in which the size of your monthly payments will be determined by your total income. You'll repay the loan directly to the government, and it will never be sold to another bank. Therefore, you'll have a single contact number should questions arise during your repayment period.

Conversely, if your school is not a Direct Lender, it belongs to the FFELP and you must use private lenders to obtain your federal education loans. The private lender you choose is entirely up to you. Many schools maintain relationships with lenders who in turn, appear on the school's preferred lender list. Even though a school might encourage you to use one of their preferred lenders for both federal and alternative loans, you are under no obligation to do so.

Before you sign a promissory note committing yourself to a lender, do your homework. All lenders are not created equally. Be completely aware of your options and compare the terms of competing lenders. Some may waive origination fees or offer lower rates while others promise discounts at repayment or reductions for periods of timely payments. Take the time to determine which terms suit you best and be confident with your decision.