What Student Loans Do You Have?

When I ask people what types of student loans they’ve got, many borrowers simply reply that their loans are with Sallie Mae. Okay, stop right there. That doesn’t tell me much, because Sallie Mae collects on both federal and private loans.

So, let’s go deeper and really answer this question better. There are two basic types of student loans: (1) federal loans, and (2) private loans.

If you don’t know what you’ve got, then you need to. You can contact your loan companies, and they should tell you the truth. Or you can go to the National Student Loan Data System here (tip: you’ll need your Fafsa pin number).

Federal Student Loan Types

But, federal loans come in a bunch of varieties. These are examples of Federal Student Loans:

1) Direct Loans, which are loans provided directly from the U.S. Department of Education;

2) Stafford loans, which might be either subsidized or unsubsidized (if a loan is subsidized, this means that the government pays the interest during a period of deferment);

3) PLUS loans, which are loans for parents of undergraduates or for graduate students for actual graduate studies;

4) Perkins loans, which are loans provided directly by the university or college and then collected by that same school, or

5) Federal Family Education Loans (FFEL), which were granted prior to 2010 through various private banks but guaranteed by the U.S. Department of Education.

Private Student Loans

Private student loans are completely different from federal loans. One hint is that quite often, private banks require borrowers to obtain a cosigner. Federal loans (with the exception of PLUS loans) do not require a credit check, and thus do not require cosigners.

It’s extremely important to know if your student loans are federal or private. If your loans default, then our strategies for getting you out of federal loan default are quite varied. And those strategies are very precise and often successful. Getting private loans out of default however can be more challenging.

In any event, your first step is to determine whether your loans are federal or private. For more questions about this and other student loan issues, contact my office at 412-920-6565 or email me at shawn@shawnwrightlaw.com.