To assure greater liquidity for guaranteed loans through providing for a secondary market and certain warehousing arrangements, the legislation created the Student Loan Marketing Association. The 1972 reauthorization of the Higher Education Act of 1965 meant that the principal federal categorical student financial aid programs were in existence. The exception is the Ford Federal Direct Student Loan Program with which the Clinton administration has sought to replace guaranteed student loans. A few state student financial aid programs predate the existence of the first federal categorical aid program, National Defense Student Loans, which was created in 1958. States have sought to help students cope with educational costs through either direct aid or indirect aid or some combination of both.
Direct aid consists mainly of grants and scholarships but occasionally of loans and work.
Indirect aid involves keeping effective tuition and fee costs to students in public institutions low. The major increase in state aid programs came as a result of the State Student Incentive Grant Program, which was part of the 1972 Higher Education Act amendments. Institutional Programs Institutional student financial aid has existed since 1643, when Lady Anne Mowlson contributed 100 English pounds to help a needy young man attend Harvard College, and has served a variety of purposes. It has enabled students of limited financial means to participate in higher education, while colleges have used it to attract students of exceptional academic accomplishments and promise, as well as those possessed of desirable skills in athletics, music, and other areas. Some aid has been awarded to students from underrepresented groups to encourage their enrollment or to secure desired student enrollment in certain disciplines.