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"Students don’t pay off or even make payments for school loans until they drop below ‘full time student’ status, so how can she have any payment at all?"

Actually after you graduate, leave school, or drop below half-time enrollment, you have six months before you begin repayment. This is called a grace period.

During the grace period on a subsidized Stafford loan, you are not required to make any payments and no interest will be charged. During the grace period of an unsubsidized Stafford loan, you do not have to pay any principal, but interest will be charged. You can either pay the interest or allow it to be capitalized - or added to your principal balance - upon entering repayment.

After you leave school or drop below half-time enrollment, you will receive information about repayment and be notified of the date your repayment begins. However, you are responsible for beginning repayment on time even if you do not receive this information. The maximum term to repay your loans is 10 years.

Alternative loans are starting to come around to mimic these characteristics of federal student loans. Wells Fargo, Chase or TERi, Wachovia, Key Bank, Nellie Mae, and Sallie Mae are the most common lenders that I see.