As a student loan borrower, the rights and responsibilities you have depend on the type of loan you are repaying. Especially if you are facing repayment problems, it’s important to know the difference in order to fully understand what options are available to you.
- Federal student loans include Stafford loans, Perkins loans, PLUS loans, and HEAL loans. These loans are offered by various lenders through the U.S. Department of Education. They can be subsidized (the government pays the interest that accrues while the student attends school) or unsubsidized. The largest lender for these loans is the federal government itself, through the Federal Direct Loan Program (FDLP). The Department of Education also coordinates loans from private lenders through the Federal Family Education Loan (FFEL) Program, which guarantees the loans (i.e., it pays off the lender when a borrower defaults on a loan). Federal loans are the safest type of student loan: the government provides a variety of programs to help borrowers who are delinquent or in default get back on track, and is required by law to notify you about them.
- Private student loans, also called alternative student loans, are made by private lenders without the participation of the Department of Education. They should not be confused with FFEL loans, which are made by private lenders but are coordinated and guaranteed by the federal government. Private loans are often made by the same financial institutions that make FFEL loans, but they are not subject to the same regulations as federal loans, and lenders are not required to provide the same repayment options to borrowers who are delinquent or in default.
You may also have taken out a consolidation loan at some point to combine multiple student loans into a single loan with more manageable terms. Consolidation loans can be either federal or private; federal consolidation loans are offered through both the FDLP and FFEL programs. In some case you may lose certain rights by consolidating your loans, especially if you consolidate federal loans into a private consolidation loan or if you consolidate different types of federal loans together.
If you’re not sure what kind of student loans you have, you can use the National Student Loan Data System to retrieve information about any federal loans you have taken out.