The Federal Family Education Loan Program (FFELP) is a mirror program to the Federal Direct Loan Program, however, in this case the federal loans are not actually given out by the Department of Education. Even though this program is through the Department, the government is merely the reinsurer (guarantees the insurer of your loan) of the private companies who take on your loan.
The Lender
FFELP loans are not given out by any part of the federal government. These loans are given out by private lenders. Yep, a private bank issues you your Stafford Loan in this case. So this means that the originator of that Stafford loan is, for example, Citibank. So how can I be sure they stick to the federally approved rate, and all other terms of the federal loan?
The Insurer
Guaranteeing that each loan is handled appropriately is done through each state’s student loan program, who is also the insurer on your loan. Each state has a differently titled program, but they all insure the loans as well as provide a list of approved institution through which to receive your federal loan. By law, a school cannot partner solely with a single company, though they can prefer one.
The Servicer
Additionally, that private lender (usually a bank you have heard of, or are a member of) will often sell off your loan to another private entity who is the servicer of that loan. This will be the entity to which you will make your payments and, should you default on your loan, you would have to deal with