With the high cost of attending college, many students and their families have had to take out one or more student loans. When students graduate, decent-paying jobs are not always available. As a result, many borrowers report difficulty repaying their student loans, and loan servicers and debt collectors are not always easy to work with. The following information is for anyone seeking to repay student loans.
Know Your Loans
The first thing you should do if you have difficulty repaying a student loan is to determine what kind of loan you have. This will affect your rights. There are two main types of student loans: (1) federal student loans-which are guaranteed or issued by the federal government, and (2) private or non-federal student loans-which are issued by private lenders, a state agency, or by the schools themselves.
Federal Student Loans
The largest provider of student loans is the U.S. Government. Today, federal student loans are issued directly from the U.S. Department of Education. The federal government is your lender, unlike the past when the federal government guaranteed the loans, but used private lenders as middlemen to issue the loans. The U.S. Department of Education has four types of federal student loan programs: Direct Loans, Direct PLUS Loans, Direct Consolidation Loans, and Perkins Loans:
Federal Direct Subsidized and Direct Unsubsidized Loans
Federal Direct Subsidized and Direct Unsubsidized Loans are the largest federal student loan program, often referred to as Stafford Loans or Direct Stafford Loans:
- Direct Subsidized Loans are available to undergraduate students who demonstrate financial need. The school determines the amount that the student can borrow. The government pays interest during your time in school, grace periods , and periods of deferment for this low interest loan.
- Direct Unsubsidized Loans are available to undergraduate and graduate students. A student does not need to demonstrate financial need to qualify. The school determines the amount a student can borrow. The student is responsible to pay the interest during all periods.
Direct PLUS Loans
Direct PLUS Loans are available to parents of undergraduate dependent students, and to graduate or professional degree students. PLUS loans assess a loan fee that is proportionately deducted from each loan disbursement. Interest is charged during all periods and PLUS loans require a credit check.
Direct Consolidation Loans
Direct Consolidation Loans allow consolidation of eligible federal loans into one loan with a single loan servicer after the borrower leaves school. Private loans and parental loans cannot be consolidated into a Direct Consolidation Loan.
Federal Perkins Loans
Federal Perkins Loans are low-interest loans for undergraduates and graduate students who demonstrate exceptional financial need. Under this program, the school is the lender. The Perkins Loan Program expired in for new borrowers. If you have questions about a Perkins Loan, contact your school’s financial aid office or the U.S. Department of Education at (800) 433-3243 or (866) 313-3797 for more information.
Non-Federal Loans-Private or State Student Loans
Private student loans are any other type of student loans that are not federal loans. Banks, credit unions, state agencies, colleges, universities, and post-secondary institution all make private loans. Private loans are generally more expensive than federal student loans, and usually offer few repayment options and fewer default protections. In Minnesota, there are two types of non-federal student loans:
Private Loans may be offered by private financial lenders, such as a bank or credit union or offered directly by a school. In general, private loans are more expensive than federal student loans, and eligibility often depends on your credit history. Many private student loans require a cosigner and require payments while you are still in school. The interest on private loans may be variable. A variable interest rate means the rate can go up as interest rates in the marketplace rise. A higher interest rate means higher monthly payments and bigger loan balances. There may be fewer protections and fewer repayment options for private student loans as compared to federal student loans.
The Minnesota Student Educational Loan Fund (SELF) Program is a long-term, low-interest educational loan from the Minnesota Office of Higher Education, a state agency. The loan program is only for Minnesota residents, and a cosigner is required. Before you apply for the SELF Loan, be sure to look into any federal education loans for which you may be eligible. In general, SELF loans do not have as many benefits or repayment options as federal student loans. For information on the Minnesota SELF Loans, contact the Office of Higher Education as follows:
How to Determine Your Loan Type
You may have more than one student loan, or may have both private and federal student loans. The following may assist you in compiling and tracking your loan information and planning for repayment of your loans:
Keep Track of Your Loans
Keep copies of your student loan papers. It is important to keep track of the lender, loan servicer, balance, and repayment status for each of your student loans. These details help determine your loan repayment and other program options.
Visit the National Student Loan Data System (NSLDS) to get a list of all your federal student loans. The NSLDS is the U.S. Department of Education’s central database for all federal student loans. It receives data from schools, guaranty agencies, the Direct Loan program, and other U.S. Department of Education programs. The NSLDS tracks federal student loans from the time you apply to the time you complete repayment. All federal student loans can be found through this database. You may contact the NSLDS as follows:
If you cannot locate your loan through the NSLDS, you probably have a private or state student loan. To locate more information about your private student loans, try viewing a free copy of your credit report, get in touch with your school’s financial aid office, or contact the Minnesota Office of Higher Education to see if they can help you to identify your student loans.