Question 1

Who actually owns my student loan once I've borrowed it?

Accepted Answer

For federal loans, the U.S. Department of Education is the lender, though a separate company called a loan servicer manages your account and payments on its behalf. For private loans, a bank, credit union, or other financial institution is both the lender and, usually, the one you deal with directly, though loans can be sold or transferred to another servicer over time.

Question 2

How is a student loan different from other kinds of debt?

Accepted Answer

A student loan is a fixed sum borrowed specifically for education costs that you agree to pay back with interest over an agreed schedule. Unlike a credit card, it isn't revolving credit you can keep drawing from; unlike most personal loans, federal student loans come with borrower protections — income-driven repayment, deferment, and certain forgiveness paths — that other consumer debt generally doesn't offer.

Question 3

What are the main types of federal student loans?

Accepted Answer

The core federal options are Direct Subsidized Loans and Direct Unsubsidized Loans for undergraduates, Direct Unsubsidized Loans for graduate students, Direct PLUS Loans for graduate students or parents of undergraduates, and Direct Consolidation Loans, which combine existing federal loans into one. Each has its own eligibility rules, interest terms, and borrowing limits.

Question 4

What's the difference between subsidized and unsubsidized federal loans?

Accepted Answer

With a subsidized loan, the government pays the interest while you're in school at least half-time, during your grace period, and during deferment, so your balance doesn't grow in the meantime. With an unsubsidized loan, interest accrues the entire time, including while you're still in school, and gets added to your balance if you don't pay it as it accrues.

Question 5

What can I do if my loan servicer makes a mistake?

Accepted Answer

Start by contacting your servicer directly and documenting the issue in writing. If it isn't resolved, you can file a complaint with the Federal Student Aid Ombudsman or the Consumer Financial Protection Bureau, both of which handle disputes between borrowers and servicers and can push for a correction.

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FAQ

Frequently Asked Questions